The Machining division of Mazda manufactures parts that are sold to the assembly division. These parts can also be sold to external customers. You are given the following information:

To Assembly Division To External Customers Total

Sales

$600,000$ parts x $$8\mathrm{.}00$ $$4,800,000$

$400,000$ parts x $$9\mathrm{.}00$ $$3,600,000$ $$8,400,000$

Variable Expenses at $$3\mathrm{.}75$ per part $(2,250,000)(1,500,000)(3,750,000$

Contribution Margin $2,550,0002,100,0004,650,000$

Fixed Expenses $(1,350,000)(900,000)(2,250,000)$

Net Income $$1,200,000$ $$1,200,000$ $$2,400,000$

An external buyer has offered to supply the parts to the Assembly division for $$5\mathrm{.}50$ each. The Machining department is worried about having excess capacity if the Assembly division accepts this offer, as the Machining department can only sell $400,000$ parts to its external customers.

Required:

Can the Machining department match the $$5\mathrm{.}50$ price and still show a net profit for their sales to the Assembly division?

If the fixed costs are unable to be changed in total, should the Machining department match the $$5\mathrm{.}50$ price?

Show your calculations on your separately$-$submitted workpaper.