Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Division A manufactures speakers. The speakers can be sold either to Division B of the same company or to outside customers. Last year, the following
Division A manufactures speakers. The speakers can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling Value Per Speaker $250 Variable production cost per speaker $90 Number of speakers Produced during the year 20,000 Sold to outside customers 16,000 Sold to Division B 4,000 Sales to Division B were at the same price as sales to outside customers. The speakers purchased by Division B are used in an electronic instrument manufactured by that division (one speaker per instrument). Division B incurs $100 in additional cost per instrument and then sells the instruments for $300 each. Assume that Division A's manufacturing capacity is 20,000 speakers, and demand from outside customers will remain at 16,000 units. Next year, Division B wants to purchase 5,000 speakers from Division A rather than 4,000. Speakers of this type are not available from other sources. If Division A decides to sell the extra 1,000 speakers to Division B, what impact if any will the decision have on the overall company's profits? Increase / Decrease / No Change Enter negative number if decrease
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started