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The materials used by Hibiscus Company's Division A are currently purchased from an outside supplier at...

The materials used by Hibiscus Company's Division A are currently purchased from an outside supplier at $54 per unit. Division B is able to supply Division A with 23,500 units at a variable cost of $50 per unit. The two divisions have recently negotiated a transfer price of $51 per unit for the 23,500 units. Enter an increase as a positive number and a decrease as a negative number.

a. By how much will each division's income increase as a result of this transfer?

Division A $
Division B $

b. What is the total increase in income for Hibiscus Company?

$

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Answer #1
Unit Variable Cost Total
Division B Cost 23500 50 1175000
Transfer of material by Division B to division A 23500 51 1198500
Increase in income = (Sale- Cost) 23500 1 23500
Increase in Income of Division B = $ 23,500
Unit Variable Cost Total
Purchase cost of outsider supplier 23500 54 1269000
Cost of material id buy from Division B 23500 51 1198500
Increase in income 23500 3 70500
Increase in income of Hibiscus Copnay = Income of Division A + Income of Division B

= 70500 + 23500

= $ 94,000
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