The Pole Division of Hillyard Company Produces Poles Which Can

Multiple Choice

The Pole Division of Hillyard Company produces poles which can be sold to outside customers or transferred to the Flag Division of Hillyard Company. Last year the Flag Division bought 50,000 poles from Pole at $2.50 each. The following data are available for last year's activities in the Pole Division: In order to sell 50,000 poles to the Flag Division, the Pole Division must give up sales of 30,000 poles to outside customers. That is, the Pole Division could sell 380,000 poles each year to outside customers (rather than only 350,000 poles as shown above) if it were not making sales to the Flag Division.
-Suppose that last year an outside supplier would have been willing to provide the Flag Division with the basic poles at $2.10 each.If Flag had chosen to buy all of its poles from the outside supplier instead of the Pole Division,the change in net operating income for the company as a whole would have been:

A) $45,000 increase
B) $20,000 decrease
C) $20,000 increase
D) $25,000 increase