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 $ 200 15,000 units $ 190 $ 1,350,000 100% 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 $240,000 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 $25, 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req Req 3B 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.) Complete this question by entering your answers in the tabs below. Req 1 Req 2A Reg 2B Req Reg 3B Assume that division B can save $240,000 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 > Net benefit to the company as a whole for A to buy outside Net cost to the company as a whole for A to buy outside Reg 1 Reg 2A Reg 2B Req Reg 3B From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market? OYes ONO Req 1 Req 2A Req 2B Req Req 3B Assume the situation in Requirement 1. If the outside market value for the materials drops $25, 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 > Net benefit to the company as a whole for A to buy outside Net cost to the company as a whole for A to buy outside Reg 1 Req 2A Reg 2B Req 3A Reg 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 O No
