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The Assembly Division of American Car Company has offered to purchase 90,000 batteries from the Electrical Division for $90 per battery. At a normal volume
The Assembly Division of American Car Company has offered to purchase 90,000 batteries from the Electrical Division for $90 per battery. At a normal volume of 250,000 batteries per year, production costs per battery are as follows: $40 $12 Direct materials Direct labor Variable overhead Fixed overhead $10 $40 The Electrical Division has been selling 250,000 batteries per year to outside buyers at $136 each; capacity is 350,000 batteries per year. Assembly Division currently buys batteries from outside sources for $130 each. If Electrical accepts Assembly's offer, then what will be the financial advantage or disadvantage of internal trade for the Assembly Division? O $1,620,000 advantage $3,600,000 advantage O $2,520,000 advantage O $5,220,000 advantage O None of the above
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