Swan Company Has Two Divisions,Hill and Paradise

Multiple Choice

Swan Company has two divisions,Hill and Paradise.Hill produces a unit that Paradise could use in its production.Paradise currently is purchasing 5,000 units from an outside supplier for $56.Hill is operating at less than full capacity and has variable costs of $30.80 per unit.The full cost to manufacture the unit is $43.40.Hill currently sells 450,000 units at a selling price of $61.60.What would be the impact on Swan Company's overall profits if the internal transfer is made?

A) $28,000 increase
B) $126,000 increase
C) $7,000 decrease
D) No change in profits