Currently, WindAir uses a compressor in its units that it purchases from an outside supplier at a cost of $231 per compressor. The manager of WindAir has approached the manager of Blossom Industries compressor division about the sale of a compressor unit to WindAir. The compressor division currently manufactures and sells to outside firms a unit that is similar to the compressor used by WindAir. The specifications of the WindAir compressor are slightly different and would reduce the compressor divisions raw materials cost by $4.95 per unit. In addition, the compressor division would not incur any variable selling costs for the units sold to WindAir. The manager of WindAir wants all of the compressors it uses to come from one supplier and has offered to pay $65 for each compressor unit. The compressor division has the capacity to produce 86,500 units. The coming years budgeted income statement for the compressor division, which follows, is based on a sales volume of 75,500 units without considering WindAirs proposal.

COMPRESSOR DIVISION Budgeted Income Statement For the Fiscal Year
		Per Unit		Total (in thousands)
Sales revenue		$100			$7,550
Manufacturing costs
Raw materials		14			1,057
Direct labour		10			755
Variable overhead		12			906
Fixed overhead		14			1,057
Total manufacturing costs		50			3,775
Gross margin		50			3,775
Operating expenses
Variable selling		6			453
Fixed selling		4			302
Fixed administration		8			604
Total operating expenses		18			1,359
Net income before taxes		$32			$2,416

Calculate the following for WindAir.

Variable costs		$enter the variable costs per unit in dollars	per unit
Total fixed costs		$enter the total fixed costs in dollars
New selling price		$enter the new selling price in dollars
New sales volume		enter the new sales volume in units	units
Net income		$enter the net income in dollars

Should WindAir make the 5% price reduction on its air conditioners even if it cannot acquire the compressors internally for $65 each? select an option YesNo

Ignoring your answer to part (a), assume that WindAir needs 30,160 units. Calculate the following for the Compressor Division. (Round "Variable cost of current sales" answer to 0 decimal places, e.g. 85 and all other answers to 2 decimal places, e.g. 25.75.)

Variable cost		$enter the variable cost per unit in dollars rounded to 2 decimal places per unit
Variable cost of current sales		$enter the variable cost of current sales per unit in dollars rounded to 0 decimal places per unit
Opportunity cost		$enter the opportunity cost in dollars per unit rounded to 2 decimal places per unit
Minimum transfer price		$enter the minimum transfer price per unit in dollars rounded to 2 decimal places per unit

Should the compressor division be willing to supply the compressor units for $65 each?

Compressor division should select an option rejectaccept the offer to supply the compressor units for $65 each.

Ignoring your answer to part (a), assume that WindAir needs 30,160 units. Calculate the advantage that the corporation and Wind Air would be making from the sales.

Corporate advantage from internal sales

$enter the corporate advantage from internal sales in dollars

Would it be in the best interest of Blossom Industries for the compressor division to supply the compressor units at $65 each to the WindAir division? select an option YesNo