Tiffany Company Has Two Divisions,Gold and Silver

Multiple Choice

Tiffany Company has two divisions,Gold and Silver.Gold produces a unit that Silver could use in its production.Silver currently is purchasing 50,000 units from an outside supplier for $25.Gold is operating at less than full capacity and has variable costs of $13.50 per unit.The full cost to manufacture the unit is $20.Gold currently sells 450,000 units at a selling price of $27.If an internal transfer is made,variable shipping and administrative costs of $1 per unit could be avoided.If the internal transfer is made,what would be the impact on Tiffany Company's overall profits?

A) $625,000 increase
B) $1,125,000 increase
C) $225,000 decrease
D) No change in profits