Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lock Division of Morgantown Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 sells for $40, has a variable cost of

Lock Division of Morgantown Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 sells for $40, has a variable cost of $22, and a fixed cost per unit of $10. The Lock Division has a capacity to produce 100,000 units per period. The Cabinet Division currently purchases 10,000 units of part Z-25 from the Lock Division for $40. The Cabinet Division has been approached by an outside supplier willing to supply the parts for $36. What is the effect on Morgantown's overall profit if the Lock Division refuses the outside price and the Cabinet Division decides to buy outside?

No change in Morgantown's profits.

$40,000 increase in Morgantown's profits.

$140,000 decrease in Morgantown's profits.

$80,000 decrease in Morgantown's profits.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Systems Auditing A Practitioners Guide To Quality And Management Systems Audit

Authors: Dr Warren Doudle

1st Edition

B0C6W3G4W4, 979-8397130271

More Books

Students also viewed these Accounting questions

Question

explain what is meant by redundancy

Answered: 1 week ago