Question
I need detailed help with steps on how to solve , be ready for follow up questions on your explanation , show where each number
I need detailed help with steps on how to solve , be ready for follow up questions on your explanation , show where each number comes from :
The Post Division of Woodhead Company produces basic posts which can be sold to outside suppliers or sold to Lamp Division of the Woodhead Company. Last year, the Lamp Division bought all of its 25,000 posts from the Post Division. The following data are available for last year's activities of the Post Division :
Capacity in Units : 300,000
Selling Price Per Unit to Outside Customers : $1.75
Variable Cost Per Unit : $0.90
Fixed Costs Total : $150,000
Suppose the transfers of posts to Lamp Division cut into sales of Post Division by 15,000 units. Further, suppose that an outside supplier is willing to provide the Lamp Division with basic posts at $1.45 each.
Question : If Lamp Divsion has chosen to buy all of its posts from the outside supplier instead of the Post Division, the change in net operating income for the company as a whole would have been ? A) $1,250 decrease B) $10,250 increase C) $1,000 decrease D) $13,750 decrease E) None
Answer was shown as D) but I need help with steps as to how and why.
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