Seminole Wire Corporation

The Wire Products Division of Seminole Wire Corporation produces "bales" of steel wire that are used in various commercial applications. The bales sell for an average of $20 each and The Wire Products Division has the capacity to produce 10,000 bales per month. The Consumer Products Division of Seminole Wire Corporation uses approximately 2,000 bales of steel wire each month in its production of various appliances. The operating information for the Wire Products Division at its present level of o/perations (8,000 bales per month) follows

:Sales (all external)$160,000

Variable costs per bale:

Production$5

Selling2

G&A3

Fixed costs per bale (based on a 10,000 unit capacity):

Production$2

Selling3G&A4

The Consumer Products Division currently pays $15 per bale for wire obtained from its external supplier.

If 2,000 bales are transferred in one month to the Consumer Products at $10/bale, what would be the profit/loss of the wire products Division? Assume that only variable production indicated will be incurred by the Wire Products Division.

For the Wire Products Division to operate at break even level what would it need to charge for the production and transfer of bales to the Consumer Products Division? Assume all variable costs indicated will be incurred by the Wire Products Division