Centurion Inc. manufactures lighting equipment. It consists of several operating divisions within its business. Division A has decided to go outside the company to purchase materials since Division B plans to increase its selling price for the same materials to $$200.$ Information for Division A and Division B is given in the following table.

Outside price for materials

$$150$

Division A$$s annual purchases

$10,000$ units

Division B$$s variable costs per unit

$$140$

Division B$$s fixed costs

$$1,250,000$

Division B$$s capacity utilisation

$100\%$

Task:

Will the company benefit if division A purchases outside the company? Assume that division B cannot sell its materials to outside buyers.

Assume that division B can save $$200,000$ in fixed costs if it does not manufacture the material for division A$.$ Should division A purchase from the outside market?

Assume the situation in Task $1.$ If the outside market value for the materials drops by $$20,$ should division A buy from the outside?