#21

The Gear Division makes a part with the following characteristics: Production capacity 29,000 units Selling price to outside customers $22 Variable cost per unit $14 Fixed cost, total $104,000 The Motor Division of the same company would like to purchase 12,000 units each period from the Gear Division. The Motor Division now purchases the part from an outside supplier at a price of $21 each. Suppose the Gear Division is operating at capacity and sell all of its to outside customers. If the Gear Division sell the parts to Motor Division at $21 per unit, the company as a whole will be:

Worse of $12,000 each period

There will be no change

Better off by $12,000 each period

Worse off by $24,000 each period