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Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one produc that it manufactures
Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one produc that it manufactures and sells on the outside market 60 Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Copacity in units $ $ 44 $ 8 20,000 Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly designed product Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes Also assume that the company's divisional managers are evaluated based on their division's profits and that Division A is currently selling 15.000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier, what would be the effect on the company's profits? Multiple Choice Profits would decrease by $56,000 O O Profits would decrease by $24,000 O Profits would decrease by $64,000 O Profits would decrease by $32,000
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