Question
The DVD Division of Sound Company makes and sells compact DVD players (DVDP) that it presently sells to outside customers. Budgeted costs next month for
The DVD Division of Sound Company makes and sells compact DVD players (DVDP) that it presently sells to outside customers. Budgeted costs next month for the DVD Division are as follows:
Sales of DVDPs to outside customers | 2,800 | per unit | ||
Selling price to outside customers | $ | 185 | per unit | |
Unit variable production costs | $ | 120 | per unit | |
|
MaxiSound, another division of Sound Company, would like to buy 1,000 of the DVDPs from the DVD Division. An outside supplier has offered to sell similar DVDPs to MaxiSound for $170 each. Assume that DVD Division's monthly production capacity is 3,200 units. If the DVD Division sells 1,000 DVDPs to MaxiSound for $170 each, the effect on the monthly profits of Sound Company as a whole will be a:
$9,000 decrease
$74,000 decrease
$20,000 increase
$11,000 increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started