question from accounting problem please answer as soon as possible thank you
Ivanhoe Industries is a diversified corporation with separate operating divisions. Each division's performance is evaluated based on its total dollar profits and return on division investment. The WindAir division manufactures and sells air conditioners. The coming year's budgeted income statement, based on a sales volume of 22,000 units, is as follows: WINDAIR DIVISION Budgeted Income Statement For the Fiscal Year Per Unit Total (in thousands) Sales revenue $1,000 $22,000 Manufacturing costs Compressor 175 3.850 Other raw materials 93 2.046 Direct labour 75 1,650 Variable overhead 113 2,486 Fixed overhead 80 1,760 Total manufacturing costs 536 11,792 Gross margin 464 10,208 Operating expenses Variable selling 45 990 Fixed selling 48 1,056 Fixed administration 95 2,090 Total operating expenses 188 4,136 Net income before taxes $276 $6,072WindAir's manager believes that sales can be increased if it reduces the unit selling price of the air conditioners. A market research study conducted by an independent firm at the manager's request indicates that a 5% reduction ($50) in the selling price would increase the sales volume by 16%, or 3,520 units. WindAir has enough production capacity to manage this increased volume with no increase in fixed costs. Currently, WindAir uses a compressor in its units that it purchases from an outside supplier at a cost of $175 per compressor. The manager of WindAir has approached the manager of Ivanhoe Industries' compressor division about the sale of a compressor unit to WindAir. The compressor division currently manufactures and sells to outside firms a unit that is similar to the compressor used by WindAir. The specifications of the WindAir compressor are slightly different and would reduce the compressor division's raw materials cost by $3.75 per unit. In addition, the compressor division would not incur any variable selling costs for the units sold to WindAir. The manager of WindAir wants all of the compressors it uses to come from one supplier and has offered to pay $80 for each compressor unit. The compressor division has the capacity to produce 82,500 units. The coming year's budgeted income statement for the compressor division, which follows, is based on a sales volume of 71,500 units without considering WindAir's proposal. COMPRESSOR DIVISION Budgeted Income Statement For the Fiscal Year Per Unit Total (in thousands) Sales revenue $130 $9,295 Manufacturing costs Raw materials 14 1,001 Direct labour 10 715 Variable overhead 12 858 Fixed overhead 14 1.001 Total manufacturing costs 50 3,575 Gross margin 5,720 Operating expenses Variable selling 429 Fixed selling 4 286 Fixed administration 8 572 Total operating expenses 18 1,287 Net income before taxes $62 $4,433Calculate the following for WindAir. Variable costs per unit Total fixed costs New selling price New sales volume units Net income Should WindAir make the 5% price reduction on its air conditioners even if it cannot acquire the compressors internally for $80 each?Ignoring your answer to part (a). assume that WindAir needs 25,520 units. Calculate the following for the Compressor Division. (Round "Variable cost of current sales" answer to O decimal places, eg. 85 and all other answers to 2 decimal places, e.g. 25.75.) Variable cost per unit Variable cost of current sales per unit Opportunity cost per unit Minimum transfer price per unit Should the compressor division be willing to supply the compressor units for $80 each? Compressor division should the offer to supply the compressor units for $80 each. Ignoring your answer to part (a). assume that WindAir needs 25,520 units. Calculate the advantage that the corporation and Wind Air would be making from the sales. Corporate advantage from internal sales $ Would it be in the best interest of Ivanhoe Industries for the compressor division to supply the compressor units at $80 each to the WindAir division? V
