Question
VP Automation Inc. operates two divisions, the Manufacturing Division and the Assembly Division. The Manufacturing Division produces engines which it sells to external customers and
- VP Automation Inc. operates two divisions, the Manufacturing Division and the Assembly Division. The Manufacturing Division produces engines which it sells to external customers and to the Assembly Division. Each engine has $105 of variable cost and $8 of fixed cost related to it. The Manufacturing Division sells engines to its external customers for $125 per unit. The Assembly Division can purchase the engines from the Manufacturing Division, or it can purchase a similar item from an external supplier for $130 per unit. The Manufacturing Division is currently operating at full capacity to satisfy the demand of its external customers.
Should the Manufacturing Division sell to the Assembly Division?
If the Manufacturing Division decides to sell to the Assembly Division, what is the opportunity cost for the Manufacturing Division?
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Government and Not for Profit Accounting Concepts and Practices
Authors: Michael Granof, Saleha Khumawala, Thad Calabrese, Daniel Smith
7th edition
1118983270, 978-1119175025, 111917502X, 978-1119175001, 978-1118983270
