Naomi Ltd. (hereinafter "the Company") is a vehicle manufacturing company, with a distributed structure.

Each department has absolute discretion regarding purchases and sales.

In the past, the upholstery department was the main supplier of car upholstery kits for the vehicle train department.

At the beginning of 2022, the director of the Vehicle Railway Department decided to purchase the upholstery kits, in the coming year, from external suppliers at a price of NIS 20,000 per kit, which includes all the required upholstery, following the price increase by the upholstery department last year. 26,000 NIS.

The director of the upholstery department claims that the price increase of 30% is justified since it is due to an increase in production costs.

The costs of the upholstery department in the production of a single upholstery kit include variable and fixed costs of NIS 16,000 and NIS 6,000, respectively.

Will the company's CEO support the decision of the director of the assembly department not to purchase the upholstery kits from the upholstery department, in case there is no other possible use of the facilities used by the upholstery department in the upholstery production and the external supplier lowers the price to NIS 14,000?

No. One has to compare the price without the fixed costs to make a decision.

None of the other answers are correct.

No. Purchase from the supplier will result in a loss of NIS 8,000 per set.

No. Purchase from the supplier will result in a loss of 1,000 NIS per set.

Yes. It is worth buying from the external supplier because the price of the supplier is lower than the variable cost of the upholstery department.