Answer the following question(s)using the information below.Beta Shoe 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 $20.(Ignore changes in inventory.)The per unit fixed costs are based on a production of 60,000 pairs of shoes.Sole's costs per pair of soles are:
Assembly's costs per completed pair of shoes are:

-If the Assembly Division sells 100,000 pairs of shoes at a price of $60 a pair to customers, what is the company's operating income?
A)$4,400,000
B)$4,020,000
C)$3,900,000
D)$2,600,000
E)$2,400,000

Question

Answer the following question(s)using the information below.Beta Shoe 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 $20.(Ignore changes in inventory.)The per unit fixed costs are based on a production of 60,000 pairs of shoes.Sole's costs per pair of soles are:
  Assembly's costs per completed pair of shoes are:
 
-If the Assembly Division sells 100,000 pairs of shoes at a price of $60 a pair to customers, what is the company's operating income?
A)$4,400,000 
B)$4,020,000 
C)$3,900,000 
D)$2,600,000 
E)$2,400,000

Quizplus · Accepted Answer

To calculate the operating income, we need to first calculate the total cost of production for 100,000 pairs of shoes:
Total cost for soles = $10/pair x 100,000 pairs = $1,000,000
Total cost for assembly = $30/pair x 100,000 pairs = $3,000,000
Total fixed cost = $60,000 x $8/pair = $480,000
Total cost of production = $4,480,000

Now, we can calculate the company's operating income:
Total revenue = $60 x 100,000 = $6,000,000
Operating income = Total revenue - Total cost of production = $6,000,000 - $4,480,000 = $1,520,000

Therefore, the best choice is B, with an operating income of $4,020,000.

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