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6) The Tire Division of Traker Company produces tires for off-road sport vehicles. One- third of Tire's output is sold to an internal division of
6) The Tire Division of Traker Company produces tires for off-road sport vehicles. One- third of Tire's output is sold to an internal division of Traker; the remainder is sold to outside customers. Tire's estimated operating profit for the year is: Outside Sales Variable costs Internal $ 150,000 $ 400,000 100,000 200,000 Fixed costs 30,000 60,000 Operating profits $ 20,000 $ 140,000 Unit sales 10,000 20,000 The internal division has an opportunity to purchase 10,000 tires of the same quality from an outside supplier on a continuing basis. The Tire Division cannot sell any additional products to outside customers. Should Traker Company allow its internal division to purchase the tires from the outside supplier at $13.00 per unit? A) No; making the tires will save Traker $15,000. B) Yes; buying the tires will save Traker $15,000. C) No; making the tires will save Traker $30,000. D) Yes; buying the tires will save Traker $30,000
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