Truball Inc., which manufactures sports equipment, consists of several operating divisions. Division A has decided to go outside the company to buy materials since division B plans to increase its selling price for the same materials to $200. Information for division A and division B follows:

Outside price for materials$145Division A's annual purchases9,500unitsDivision B's variable costs per unit$135Division B's fixed costs, per year$1,240,000Division B's capacity utilization100%

Required:

1. Assume that division B cannot sell its materials to outside buyers. Calculate the net cost or benefit to the company as a whole if Division A purchases the materials outside the company.

2-a. Assume that division B can save $165,000 in fixed costs if it does not manufacture the material for Division A.Calculate the net cost or benefit to the company as a whole for A to purchase outside the company.

2-b. From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market?

3-a. Assume the situation in Requirement 1. If the outside market value for the materials drops $26, calculate the net cost or benefit to the company as a whole for A to purchase outside the company.

3-b. From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market?

Req. 1

Assume that division B cannot sell its materials to outside buyers. Calculate the net cost or benefit to the company as a whole if Division A purchases the materials outside the company.(Enter all the amounts as positive value.)

Req. 2A

Assume that division B can save $165,000 in fixed costs if it does not manufacture the material for Division A.Calculate the net cost or benefit to the company as a whole for A to purchase outside the company.(Enter all the amounts as positive value.)

Req 2b

From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market? Yes or No?

Req 3A

Assume the situation in Requirement 1. If the outside market value for the materials drops $26, calculate the net cost or benefit to the company as a whole for A to purchase outside the company.(Enter all the amounts as positive value.)

Req 3b

From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market? Yes or No?