Sore Feet Ltd. manufactures only one type of shoe and has two divisions, the Sole...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Sore Feet Ltd. manufactures only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $60. (Ignore changes in inventory.) The per unit fixed costs are based on a production of 50,000 pairs of shoes.
Sole's costs per pair of soles
are:
Direct materials
$6
Direct labour
$2
Variable overhead
$1
Division fixed costs
$2
Assembly's costs per completed pair of shoes
are:
Direct materials
$7
Direct labour
$4
Variable overhead
$2
Division fixed costs
$4
If the Assembly Division sells 80,000 pairs of shoes at a price of $55.75 a pair to customers, what is the company's operating income?
A.
$4,020,000
B.
$3,900,000
C.
$2,220,000
D.
$4,400,000
E.
$2,400,000
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
