Question
Division A of Diomedes S. Corporation produces part CF37 that it sells to outside customers for $45 a unit. Division B of Diomedes S. Corporation
Division A of Diomedes S. Corporation produces part CF37 that it sells to outside customers for $45 a unit. Division B of Diomedes S. Corporation uses part CF37 as a component in one of its products. Division B currently buys part CF37 from an outside supplier for $40 a unit. Division As annual production capacity of part CF37 is 100,000 units and the variable cost of part CF37 is $20 per unit and the fixed cost is $15 per unit. Currently, Division A has a demand from outside customers for 40,000 units of part CF37, and Division Bs current needs are for 15,850 units of part CF37. Q) If Division B would agree to buy part CF37 from Division A rather than buying it from the outside supplier and the division managers agreed to a transfer price of $24.50 per unit, what would be the impact on Diomedes S. Corporations income? (If increase, type just the number; if decrease, type a negative sign in front of the number (no space between); if no increase or decrease, type 0 (zero), as a number, not a word.)
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