Division A of Pirkul and Co., is theonlysource of supply for an intermediate product, INTPRO, that can potentially be converted by Division B into a finished product, FINPRO.There is no outside market for INTPRO.If A decides to produce INTPRO, it can produce 60,000 units per month after spending variable costs of $10.00 per unit.As an alternative, without any change in its monthly fixed costs, it can produce and sell (in the outside market) 60,000 units per month of a new product, ANEWPRO, for a contribution of $7 per unit.The above two options are the only opportunities available to A.

If Division B decides to convert INTPRO into FINPRO, it will need one unit of INTPRO to manufacture one unit of FINPRO and it can then sell 60,000 units of FINPRO at a selling price of $48 per unit after spending anadditional$10 per unit in variable costs.As an alternative, without any change in its monthly fixed costs, B can produce and sell 40,000 units per month of a new product, BNEWPRO, using components bought from outside, for a contribution of $21 per unit.Again, assume that these are the only two opportunities that B has.

Assume a centralized setup.Pirkul and Co. should

make and sell 40,000 units of BNEWPRO and shut down Division A

make and convert 60,000 units of INTPRO to 60,000 units of FINPRO and sell FINPRO

make and sell 60,000 units of ANEWPRO and 40,000 units of BNEWPRO

make and sell 60,000 units of ANEWPRO and shut down Division B