Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 26,000 units from an outside supplier for $16 per unit. Polk is currently operating at less than its full capacity of 580,000 units and has variable costs of $8 per unit. The full cost to manufacture the unit is $11. Polk currently sells 460,000 units at a selling price of $19 per unit. a. What will be the effect on Avery Company's operating profit if the transfer is made internally?

Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 26,000 units from an outside supplier for $16 per unit. Polk is currently operating at less than its full capacity of 580,000 units and has variable costs of $8 per unit. The full cost to manufacture the unit is $11. Polk currently sells 460,000 units at a selling price of $19 per unit. a. What will be the effect on Avery Company's operating profit if the transfer is made internally?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 15E

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