The Provence Division has always acquired a certain equipment component from the Normandy

Division. However, when informed that the Normandy Division was increasing its unit price to $325,$

the Provence Division's management decided to purchase the component from outside suppliers at a

price of $300.$

The Normandy Division had recently acquired some specialized equipment that was used primar$-$

ily to make this component. The manager cited the resulting high depreciation charges as the justifi$-$

cation for the price boost. He asked the president of the company to instruct the Provence Division to

buy from Normandy at the $325$ price. He supplied the following data to back his request:

Suppose there are no alternative uses of the Normandy facilities. Will the company as a whole

benefit if the Provence Division buys from the outside suppliers for $300$ per unit? Show compu$-$

tations to support your answer.

Suppose internal facilities of Normandy would not otherwise be idle. The equipment and other

facilities would be assigned to other production operations that would otherwise require an addi$-$

tional annual outlay of $45,500.$ Should the Provence Division purchase from outsiders at $300$

per unit?

Suppose that there are no alternative uses for Normandy's internal facilities and that the outsiders'

selling price drops by $30.$ Should the Provence Division purchase from outsiders?

As the president, how would you respond to the Normandy Division manager's request? Would

your response differ depending on the specific situations described in numbers $1$ through $3$

above? Why?