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Truball Incorporated which manufactures sports equipment, consists of several operating divisions. Division A has decided to go outside the company to buy materials because
Truball Incorporated which manufactures sports equipment, consists of several operating divisions. Division A has decided to go outside the company to buy materials because 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 Division A's annual purchases Division B's variable costs per unit Division B's fixed costs, per year Division B's capacity utilization Required: $ 140 9,000 units $ 130 1,230,000 100% 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 $170,000 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.
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