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The Athens Company has two divisions, Alpha and Delta. Delta Division produces a product at a variable cost of $7 per unit, and sells 150,000 units to outside customers at $12 per unit and 40,000 units to Alpha Division at variable cost plus 40 percent. Under the dual transfer price system, Alpha Division pays only the variable cost per unit. Delta Division's fixed costs are $275,000 per year. Alpha Division sells its finished product to outside customers at $25 per unit. Alpha has variable costs of $5 per unit, in addition to the costs from Delta Division. Alpha Division's annual fixed costs are $180,000. There are no beginning or ending inventories.

(a) Prepare the income statements for the two divisions and the company as a whole.

Do not enter any answer as negative numbers.

Athens Company Divisional Income Statement
	Alpha	Delta	Company
Sales:
External	$Answer	$Answer	$Answer
Internal	Answer	Answer	Answer
Total	Answer	Answer	Answer
Variable costs:
Incurred	Answer	Answer	Answer
Transferred in	Answer	Answer	Answer
Total	Answer	Answer	Answer
Contribution margin	Answer	Answer	Answer
Fixed costs	Answer	Answer	Answer
Net income	$Answer	$Answer	$Answer

(b) When preparing divisional income statements for a two-division company where one division sells some product internally to the other division, the sum of the net incomes of the two divisions will always equal the total net income of the company.

True

False

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