Question
The company has two subsidiaries E and F. Subsidiary E produces products with the following characteristics Unit sales price to external customers: 100 USD Variable
The company has two subsidiaries E and F. Subsidiary E produces products with the following characteristics Unit sales price to external customers: 100 USD Variable unit cost: $40 Total fixed costs: 120,000 USD Maximum production capacity (units): 20,000 E is able to sell all its products on the external market. F wants to buy 8,000 units from subsidiary E at a price of $95 per unit, which is the same price as its external supplier. In the case of a sale to F, the variable unit costs incurred by E remain the same. E is currently working at 70% of its capacity. If E rejects the $95 price internally and F continues to buy from an outside supplier, what is the impact on the company's overall performance? A reduction of 320,000 No answer is appropriate Decrease of $150,000 Reduction of $360,000 Reduction of $40,000
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