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Division A makes a part with the following characteristics: Production Capacity in Units 15,000 units Selling Price to Outside Customers $25 Vanable Cost per Unit
Division A makes a part with the following characteristics: Production Capacity in Units 15,000 units Selling Price to Outside Customers $25 Vanable Cost per Unit $18 Total Fixed Costs $60,000 Division B, another division of the same company, would like to purchase 5,000 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 has simple idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division B continues to purchase parts from an outside supplier rather than from Division A, what will be the effect on the operating income of the company as a whole? O A Lower by $10,000 each period. O B.Lower by $30,000 each period. O C Higher by $15,000 each period. D Lower by $35,000 each period
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