Internal or External Acquisitions:

No Opportunity Costs

The Van Division of MotoCar Corporation has offered to purchase 180,000 wheels from the Wheel Division for $41 per wheel. At a normal volume of 500,000 wheels per year, production costs per wheel for the Wheel Division are as follows:

Direct materials	$15
Direct labor	11
Variable overhead	6
Fixed overhead	17
Total	$49

The Wheel Division has been selling 500,000 wheels per year to outside buyers at $58 each. Capacity is 700,000 wheels per year. The Van Division has been buying wheels from outside suppliers at $56 per wheel.

FILL IN THE BLANKS:

(a) Calculate the net benefit (or cost) to the Wheel Division of accepting the offer from the Van Division. $__________per wheel

(b) Calculate the net benefit (or cost) to Motocar Corp. if the Wheel Division accepts the offer from the Van Division.

$__________per wheel