ll each division's income increase as a result of this transfer
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The materials used by the North Division of Horton Company are currently purchased from outside suppliers at $29 per unit. These same materials are produced by Horton’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $14 per unit. The division is currently producing 126,000 units and has capacity of 180,000 units. The two divisions have recently negotiated a transfer price of $20 per unit for 54,000 units.
By how much will each division's income increase as a result of this transfer?
South Division | $ |
North Division | $ |
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