1. Income from operations for Divison B is $150,000, total service department charges are $400,000 and operating expenses are $2,266,000. What are the revenues for Division B?
A. $550,000
B. $3,216,000
C. $2,816,000
D. $2,666,000
2. McClelland Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. McClelland desires a profit equal to a 21% rate of return on invested assets of $600,000.
Fixed factory overhead cost: $37,500
Fixed selling and administrative costs: $7,500
Variable direct materials cost per unit: $4.50
Variable direct labor cost per unit: $1.88
Variable factory overhead cost per unit: $1.13
Variable selling and administrative cost per unit: $4.50
The unit selling price for the company's product is:
A. $15.00
B. $13.82
C. $14.86
D. $14.76
3. A business is considering a cash outlay of $500,000 for the purchase of land, which it could lease for $40,000 per year. If alternative investments are available which yield a 21% return, the opportunity cost of the purchase of the land is:
A. $105,000
B. $40,000
C. $65,000
D. $8,400
4. Materials used by Aro-Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales.
How much would Division 6's income from operations increase?
A. $8,000
B. $15,000
C. $80,000
D. $150,000