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Division A manufactures parts with the following characteristics: Selling price to external customers ................ $ 30 Unit variable cost ....................... ............... $ 20 Total fixed
Division A manufactures parts with the following characteristics: Selling price to external customers ................ $ 30 Unit variable cost ....................... ............... $ 20 Total fixed charges .............................. . $ 60,000 Production capacity in units .......... 15,000 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 now purchases these parts from an external supplier at a price of $ 28 each. Suppose that Division A has sufficient spare capacity to meet all of Division B's needs without increasing fixed costs and reducing sales to external customers. If Division A refuses to accept the price of $ 28 internally and Division B continues to purchase from the external supplier, the company as a whole: Options for question 20: will earn $ 30,000 per period Lose $ 20,000 per period Lose $ 40,000 per period will earn $ 10,000 per period
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