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The Kelly - Elias Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as

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The Kelly - Elias Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions involving the sale of that division's output both to outsiders and to other divisions of Kelly - Elias. (Click the icon to view the information on the divisions.) The company already completed an analysis to determine if it was in its best interest to have division C purchase 2,000 units from an external supplier for $155 per unit, assuming that there are no alternative uses for internal facilities of division A. (Click the icon to view the results of the analysis.) Now, assume that division A can sell the 2,000 units to other customers at $187 per unit, with variable marketing costs of $7 per unit. Read the requirement. Eegin by calculating the contibution margin trom seling unty to other customers. Then celoulase the net benett (coe) so the compeny as a whole. (Eritar a net cost iang pareneneses or a minus sign.) Lass: Contebution mage trom seling unta lo other cutomers Division C has in the past always purchased its requirement of a particular tractor-engine component from division A. However, when informed that division A is increasing its selling price to $180, division C's manager decides to purchase the engine component from external suppliers. Division C can purchase the component for $155 per unit in the open market. Division A insists that, because of the recent installation of some highly specialized equipment and the resulting high depreciation charges, it will not be able to earn an adequate return on its investment unless it raises its price. Division A's manager appeals to top management of Kelly - Elias for support in the dispute with division C and supplies the following operating data: Purchase costs paid to external suppliers Less: Savings in variable costs Requirement Determine whether Kelly - Elias will benefit if division C purchases the 2,000 units from external suppliers at $155 per unit. Show your computations

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