The retail department of Dunder Corp. has been working out a deal with a new customer, Neal Inc. The Retail department will be selling ceramic houseplant pots created internally by the Molding department. The Retail department has agreed to sell 12,430 pots to Neal Inc. at a price of $157,115.20. The Molding department has been putting together an estimate and noted that its operating income is $2.64 per unit. If the company would like to see an overall operating income per unit of $3.98 for both the departments, then what is the sales price of the units supplied by the Molding department to the Retail department?
A) $12,441.30
B) $32,815.20
C) $107,643.80
D) $140,459.00

Question

Quizplus · Accepted Answer

This question requires understanding how the overall operating income is calculated when sales involve internal sales in addition to what the end product is sold for to an external entity. Overall operating income will equal operating income (of the molding Department) plus operating income (of the retail department). You can calculate the operating income of retail department from the given information: $3.98 = $2.64 + Operating income of retail department; Operating income of retail department = $3.98 - $2.64 = $1.34 per unit. Next, multiply the number of units expected to be sold by the per unit operating income to determine the total amount of operating income of the Retail department: 12,430 pots × $1.34 = $16,656.20. Now, subtract the operating income of the Retail department from the total amount of expected sales to determine the cost of goods sold for the retail department: $157,115.20 - $16,656.20 = $140,459.00. Cost of goods sold for Retail department will be equal to the sales from the Molding department to the Retail department (Choice D).

The Retail Department of Dunder Corp