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1) Industry Cat has two divisions, A and B. For one of the company's products, Division A produces a major subassembly and Division B incorporates
1) Industry Cat has two divisions, A and B. For one of the company's products, Division A produces a major subassembly and Division B incorporates this subassembly into the final product. There is a market for both the subassembly and the final product. The following data is available: Estimated selling price for final product Average market price for subassembly Variable cost in Division A Additional variable cost for completion in Division B Per unit $400 $300 $200 $250 Should transfers be made to Division B if there is no excess capacity in Division A (i.e., all subassemblies can be sold outside)? (Yes, No) because the company would be (better, worse) off by $. Circle one Circle one /unit 2) Refer to the data in part (1). Assume Division A's production capacity is 7,000 units, but sales to the intermediate market cannot surpass 5,000 units. Should 2,000 units be produced and transferred to Division B? (Yes, No) because the company would be (better, worse) off by $ Circle one Circle one unit
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