Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end watches. Each division's costs are provided below:
Manufacturing: | Variable costs per unit | $1.36 |
| Fixed costs per unit | $5.77 |
Distribution: | Variable costs per unit | $1.30 |
| Fixed costs per unit | $0.50 |
The Distribution Division has been operating at a capacity of 4,009,000 units a week and usually purchases 2,004,500 units from the Manufacturing Division and 2,004,500 units from other suppliers at $13.00 per unit.
Assume 110,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $8.00 per unit. The Distribution Division sells the 110,000 units at a price of $18 each to customers. What is the operating income of both divisions together?
◦ $347,600
◦ $392,150
◦ $997,700
◦ $634,700