InterGlobal Industries is a diversified corporation with separate operating divisions. Each divisions performance is evaluated on the basis of profit and return on investment. The Air Comfort Division manufactures and sells air-conditioner units. The coming years budgeted income statement, which follows, is based upon a sales volume of 16,000 units.

AIR COMFORT DIVISION
Budgeted Income Statement
(In thousands)
	Per Unit					Total
Sales revenue		$	401				$	6,416
Manufacturing costs:
Compressor		$	75				$	1,200
Other direct material			33					528
Direct labor			32					512
Variable overhead			33					528
Fixed overhead			31					496
Total manufacturing costs		$	204				$	3,264
Gross margin		$	197				$	3,152
Operating expenses:
Variable selling		$	23				$	368
Fixed selling			24					384
Fixed administrative			20					320
Total operating expenses		$	67				$	1,072
Net income before taxes		$	130				$	2,080

Air Comforts division manager believes sales can be increased if the price of the air-conditioners is reduced. A market research study by an independent firm indicates that a 5 percent reduction in the selling price would increase sales volume 22 percent, or 3,520 units. The division has sufficient production capacity to manage this increased volume with no increase in fixed costs. The Air Comfort Division uses a compressor in its units, which it purchases from an outside supplier at a cost of $75 per compressor. The Air Comfort Division manager has asked the manager of the Compressor Division about selling compressor units to Air Comfort. The Compressor Division currently manufactures and sells a unit to outside firms that is similar to the unit used by the Air Comfort Division. The specifications of the Air Comfort Division compressor are slightly different, which would reduce the Compressor Divisions direct material cost by $2.50 per unit. In addition, the Compressor Division would not incur any variable selling costs in the units sold to the Air Comfort Division. The manager of the Air Comfort Division wants all of the compressors it uses to come from one supplier and has offered to pay $48 for each compressor unit. The Compressor Division has the capacity to produce 75,000 units. Its budgeted income statement for the coming year, which follows, is based on a sales volume of 64,000 units without considering Air Comforts proposal.

COMPRESSOR DIVISION
Budgeted Income Statement
(In thousands)
	Per Unit					Total
Sales revenue		$	92				$	5,888
Manufacturing costs:
Direct material		$	12				$	768
Direct labor			8					512
Variable overhead			10					640
Fixed overhead			13					832
Total manufacturing costs		$	43				$	2,752
Gross margin		$	49				$	3,136
Operating expenses:
Variable selling		$	6				$	384
Fixed selling			4					256
Fixed administrative			7					448
Total operating expenses		$	17				$	1,088
Net income before taxes		$	32				$	2,048

Required: 1-a. Calculate the increase/decrease in net income before taxes for Continental Industries assuming the Air Comfort Division institutes the 5 percent price reduction on its air-conditioner units even if it cannot acquire the compressors internally for $48 each. 2. Independently of your answer to Required 1-a, assume the Air Comfort Division needs 19,520 units. Calculate the increase/decrease in net income before taxes for the Compressor Division if it supplies the 19,520 compressor units for $48 each. 3. Independently of your answer to Required 1-a, assume the Air Comfort Division needs 19,520 units. Calculate the increase/decrease in net income before taxes for Continental Industries if the Compressor Division supplies the 19,520 compressor units for $48 each.

Reg 1A Reg 1B Reg 2 Reg 3 Calculate the increase/decrease in net income before taxes for Continental Industries assuming the Air Comfort Division institutes the 5 percent price reduction on its air-conditioner units even if it cannot acquire the compressors internally for $48 each. (Round intermediate calculations to 2 decimal places and your final answer to the nearest whole dollar amount. Enter your answer in dollars and not in thousands.) Show less Increase in net income before taxes of Req 1A Reg 1B > Req 1A Reg 1B Reg 2 Req3 Independently of your answer to Required 1-a, assume the Air Comfort Division needs 19,520 units. Calculate the increase/decrease in net income before taxes for the Compressor Division if it supplies the 19,520 compressor units for $48 each. (Round intermediate calculations to 2 decimal places and your final answer to the nearest whole dollar amount. Enter your answer in dollars and not in thousands.) Show less Decrease in net income before taxes of Req 1A Req 1B Reg 2 Reg 3 Independently of your answer to Required 1-a, assume the Air Comfort Division needs 19,520 units. Calculate the increase/decrease in net income before taxes for Continental Industries if the Compressor Division supplies the 19,520 compressor units for $48 each. (Round intermediate calculations to 2 decimal places and your final answer to the nearest whole dollar amount. Enter your answer in dollars and not in thousands.) Show less Increase in net income before taxes of