Essay
Tech Clothing Ltd.manufactures socks.The Athletic Division sells its socks for $13 a pair to outsiders.Socks have manufacturing variable and fixed costs of $3.50 and $1.25, respectively.The division's total fixed manufacturing costs are $62,500 at the normal volume of 50,000 units.The Mountain Wear Division has offered to buy 5,000 pairs of socks at the full cost of $4.75.They can sell the socks for $15.The Athletic Division does not have excess capacity but could produce the 5,000 pairs of socks using overtime.This would increase variable costs by $0.75 per unit and fixed costs by $8,900.Required:
Determine the effect on corporate operating income if the Athletic division:
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