Question
Division A makes a part with the following characteristics: Production capacity in units Selling price to outside customers Variable cost per unit Total fixed costs
Division A makes a part with the following characteristics: Production capacity in units Selling price to outside customers Variable cost per unit Total fixed costs 32,800 units $ 27 $ 20 $ 107,600 Division B, another division of the same company, would like to purchase 13,700 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price. If Division A agrees to sell the parts to Division B at $24 per unit, the company as a whole will be: Multiple Choice worse off by $82,200 each period. There will be no change in the status of the company as a whole. better off by $41,100 each period. worse off by $41,100 each period
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