Question

# Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division,...

Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is \$60.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 13,000-18,000 units. The fixed costs for the Fabrication Division are assumed to be \$11.00 per unit at 18,000 units. Compressor's costs per compressor are: Direct materials \$17 Direct labor \$14.50 Variable overhead \$3.50 Division fixed costs \$11.50 Fabrication's costs per completed air conditioner are: Direct materials \$154.00 Direct labor \$67.50 Variable overhead \$26.00 Division fixed costs \$11.50 If the Fabrication Division sells 1000 air conditioners at a price of \$475.00 per washing machine to customers, what is the operating income of both divisions together?

\$169,500

\$169,000

\$167,500

\$149,500

 Compressor division Direct material \$17 Direct labor 14.50 Variable overhead 3.50 Division fixed costs 11.50 Cost per compressor \$46.5
 Fabrication division Cost per compressor \$46.5 Direct material 154 Direct labor 67.50 Variable overhead 26 Division fixed costs 11.50 Total unit costs \$305.5

Operating income = Total sales - Total costs

Operating income = \$475,000(1,000*\$475) - 305,500(1,000*\$305.5)

Operating income = \$169,500

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