Cheney, Inc. operates with two divisions, Y and Z. In order to encourage Division Z to buy its materials

within the company form Division Y, management has allowed Division Z to record its purchases from

Division Y at Division Y's unit variable cost. And, to encourage Division Y to sell without prejudice to

Division Z, Division Y is allowed to use the same price for sales to Division Z as it uses in billing outside

customers.

Division Y can sell its entire output of 500,000 at a price of $60 per unit either internally or outside.

Total costs of production last year for Division Y were $25 million, of which $5 million were fixed costs.

Division Y sold 300,000 units on the outside market and 200,000 units to Division Z.

Division Z sold 200,000 units to the outside market at a price of $120 per unit. In addition to the cost of

materials purchased from Division Y, Division Z incurred other production costs last year of $9 million.

1) Gross margin last year for Division Y = $ ________________

2) Gross margin last year for Division Z = $ ________________

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