Answer the following question(s) using the information below.
Cool Air Ltd. manufactures only one type of air conditioner and has two divisions, the Compressor Division, and the Assembly Division. The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells it to retailers. The Compressor Division "sells" compressors to the Assembly Division. The market price for the Assembly Division to purchase a compressor is $77. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Assembly Division are assumed to be $15.00 per unit at 10,000 units.
Compressor's costs per compressor are:
Assembly's costs per completed air conditioner are:

-If the Assembly Division sells 1,000 air conditioners at a price of $750.00 per air conditioner to customers, what is the operating income of both divisions together?
A) $200,500
B) $207,000
C) $194,000
D) $165,750
E) $230,500

Question

Answer the following question(s) using the information below.
Cool Air Ltd. manufactures only one type of air conditioner and has two divisions, the Compressor Division, and the Assembly Division. The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells it to retailers. The Compressor Division "sells" compressors to the Assembly Division. The market price for the Assembly Division to purchase a compressor is $77. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Assembly Division are assumed to be $15.00 per unit at 10,000 units.
Compressor's costs per compressor are:
  Assembly's costs per completed air conditioner are:
 
-If the Assembly Division sells 1,000 air conditioners at a price of $750.00 per air conditioner to customers, what is the operating income of both divisions together?
A) $200,500 
B) $207,000 
C) $194,000 
D) $165,750 
E) $230,500

Quizplus · Accepted Answer

The Assembly Division's operating income is $100,500 (1,000 air conditioners x $100.50 per air conditioner). The Fabrication Division's operating income is $107,000 ($200,000 sales revenue - $93,000 variable costs). The total operating income of both divisions together is $207,000 ($100,500 + $107,000).

Answer the Following Question(s) Using the Information Below