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Galati Products, Inc., has just purchased a small company that specializes in the manufacture of electronic tuners that are used as a component part of
Galati Products, Inc., has just purchased a small company that specializes in the manufacture of electronic tuners that are used as a component part of TV sets. Galati Products, Inc., is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells: Selling price Expenses: Variable $20 $11 Fixed (based on a capacity of 100,000 tuners per year) 6 17 Net operating income S3 Galati Products also has an Assembly Division that assembles TV sets. This division is currently purchasing 30,000 tuners per year from an overseas supplier at a cost of $20 per tuner, less a 10% purchase discount. The president of Galati Products is anxious to have the Assembly Division begin purchasing its tuners from the newly acquired Tuner Dvion in order to "keep the profits within the corporate family
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