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The Tire Division of Traker Company produces tires for off-road sport vehicles. One-third of Tire's output is sold to an internal division of Traker, the
The Tire Division of Traker Company produces tires for off-road sport vehicles. One-third of Tire's output is sold to an internal division of Traker, the remainder is sold to outside customers. Tire's estimated operating profit for the year is: Internal $177,000 118,000 Sales Variable costs Fixed costs Operating profits Unit sales 39, eee Outside $472,000 236,000 78,000 $158,000 23,600 $ 20,000 11,800 The internal division has an opportunity to purchase 11,800 tires of the same quality from an outside supplier on a continuing basis. The Tire Division cannot sell any additional products to outside customers. Should Traker Company allow its internal division to purchase the tires from the outside supplier at $13.00 per unit? Multiple Choice No; making the tires will save Traker $17,700. Yes, buying the tires will save Traker $17,700. No; making the tires will save Traker $35.400. U Yes; buying the tires will save Traker $35,400
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