Question
Division As cost accounting records show that the cost of its product is $154 per unit$116 in variable costs and $38 in fixed costs. The
Division As cost accounting records show that the cost of its product is $154 per unit$116 in variable costs and $38 in fixed costs. The market price of the product, $160, barely covers Division As cost of production plus its selling and administrative costs. Division A has a maximum capacity of 114,700 units; it is currently producing and selling 77,300 units. Division B makes a product that uses Division As product and would like to purchase 11,600 units from Division A for $153. With $41 additional variable costs, Division B produces and sells the product for $275. 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 11,600 units to Division B for $153 each, and Division B produces and sells 11,600 units for $275. | |
b. | Division A does not sell to Division B. Division B purchases 11,600 units from an external supplier at $160 each and produces and sells 11,600 units for $275. |
Increase in corporate income | |
---|---|
a. | $enter a dollar amount |
b. | $enter a dollar amount |
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