trade of output for [ungible currency Return to problem 5 ahove. Nowassume division A is unable to accommodate division B, and B must, as aresult, go to an outside source. This souree is paid the amount P. Everything else remains as before.

aJ Assume the opportunity is taken. Determine the ineremental profit (i) to the firm and (ii) to division B.

bJ Provide journal entries on division B's hooks to record all activity associated with this opportunity. Inelude entries for work in process, eost of goods sold, revenue, and so on. (Oo not elose any temporal)' accounts.) For eonvenienee, assume all eost incurred by B is associated with eash expenditures.

e] When United Management prepares eonsolidated finaneial statements, will the eonsolidation process, working from your above entries, result in a firm-wide ineremental profit that agrees with your answer in [al? Explain.
d] CarefuUy document what happens to your answers in [b] and [e] above as P is varied between 30 and 120. What is the maximum P that would not lower B's divisional ineome?

e] As P varies between 30 and 120, how mueh eash is paid by division B to the outside souree?

AppendixLO1