8.12 Division A normally purchases its parts from Division B of the same company. D learned that Division B is increasing its price to $110 per u nit. As a result, th manager has decided to purchase the parts from an outside supplier at a unit cost less than it wou ld cost to purchase the same part from Division B. The Division B explained that inflation is the cause of the price increase and that the loss of p transferred to Division A will h u rt the division as well as the company profits. Th manager feels that the company as a whole wou ld benefit from the sale of parts t The following costs and unit purchases represen t the normal annual transaction: Units purchased 1,000 Division B's variable costs per unit $95 Division B's fixed cost per uni t $10 1. Will the company as a whole benefit if Division A purchases the units from supplier for $100 per unit? Assume that there are no alterna tive uses for facilities. 2. What would be the effect if the outside selling price decreases by $8.00 per u that Division B remains idle? 3. If Division B's facilities could be put into production for other sales at an annu of $14,500, should Division A still purchase from the outside?
Solution ID:10137790 | Question answered on 16-Oct-2016
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