(Answered)-8.12 Division A normally purchases its parts from Division B of the same company. D learned that...

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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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