The MichaelBrown 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 MichaelBrown.

Division C has in the past always purchased its requirement of a particulartractor-engine component from division A. However, when informed that division A is increasing its selling price to $175, division C's manager decides to purchase the engine component from external suppliers.

Division C can purchase the component for $150 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 MichaelBrown for support in the dispute with division C and supplies the following operating data:

C's annual purchases of the tractor-engine component	1,400 units
A's variable cost per unit of the tractor-engine component	$135
A's fixed cost per unit of the tractor-engine component	$20

The company already completed an analysis to determine if it was in its best interest to have division C purchase 1,400 units from an external supplier for $150 per unit, assuming that there are no alternative uses for internal facilities of division A.

Data Table

Purchase costs paid to external suppliers		$210,000
Less:	Savings in variable costs	189,000
Net cost to the company as a result of purchasing from external suppliers		$21,000

Now, assume that division A can sell the 1,400 units to other customers at $181 per unit, with variable marketing costs of $6 per unit.

Requirements:

Determine whether MichaelBrown will benefit if division C purchases the 1,400 units from external suppliers at $150 per unit. Show your computations.

Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a minus sign.)