Question
Division As cost accounting records show that the cost of its product is $150 per unit$103 in variable costs and $47 in fixed costs. The
Division As cost accounting records show that the cost of its product is $150 per unit$103 in variable costs and $47 in fixed costs. The market price of the product, $163, barely covers Division As cost of production plus its selling and administrative costs. Division A has a maximum capacity of 111,300 units; it is currently producing and selling 76,200 units. Division B makes a product that uses Division As product and would like to purchase 12,600 units from Division A for $159. With $44 additional variable costs, Division B produces and sells the product for $266. Division As manager is not happy with Division Bs offer and is refusing to sell.
Calculate the increase in corporate income in the following situations:
| a. | Division A sells 12,600 units to Division B for $159 each, and Division B produces and sells 12,600 units for $266. |
| b. | Division A does not sell to Division B. Division B purchases 12,600 units from an external supplier at $163 each and produces and sells 12,600 units for $266. |
| Increase in corporate income | |
| a. | $ 1,499,400 |
| b. | $? |
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Principles of Accounting
Authors: Needles, Powers, crosson
11th Edition
1439037744, 978-1133626985, 978-1439037744
