Materials Used by Boone Company in Producing Division C's Product

Multiple Choice

Materials used by Boone Company in producing Division C's product are currently purchased from outside suppliers at a cost of $20 per unit.However, the same materials are available from Division A.Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $17 per unit.A transfer price of $19 per unit is negotiated and 60,000 units of material are transferred, with no reduction in Division A's current sales. How much would Boone's total operating income increase?

A) $180,000
B) $240,000
C) $120,000
D) $300,000