Assume the transfer price for a pair of shoes is 180% of total costs of the Stitching Division and 40,000 of soles are produced and transferred to the Polishing Division.The Stitching Division's operating income is ________.
A) $896,000
B) $720,000
C) $800,000
D) $880,000

Question

Quizplus · Accepted Answer

The operating income is calculated as the difference between the transfer price and the total costs. If the transfer price is 180% of the total costs, then the operating income is 80% of the total costs. Assuming the total costs for 40,000 pairs is $1,120,000, the operating income would be 0.8 * $1,120,000 = $896,000.

Assume the Transfer Price for a Pair of Shoes Is