Question
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 $40
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 $40 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 | 18 |
Total | $50 |
The Wheel Division has been selling 500,000 wheels per year to outside buyers at $60 each. Capacity is 700,000 wheels per year. The Van Division has been buying wheels from outside suppliers at $56 per wheel. (a) Calculate the net benefit (or cost) to the Wheel Division of accepting the offer from the Van Division. $Answer per wheel (b) Calculate the net benefit (or cost) to Motocar Corp. if the Wheel Division accepts the offer from the Van Division. $Answer per wheel
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