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WDW Inc. has a Receiver Division that manufactures a standard receiver that can be used by another division in the company, the Commercial Products
WDW Inc. has a Receiver Division that manufactures a standard receiver that can be used by another division in the company, the Commercial Products Division, in one of its products. Data for the receiver are as follows: Receiver Division's 86,000 standard capacity receivers Selling price to $63 per receiver outside customers Variable cost per $22 receiver Fixed cost per receiver (based on $18 capacity) The Commercial Products Division currently buys 5,000 of these receivers per year from an outside supplier at a cost of $57 per receiver. Assume Receiver Division has enough capacity to provide the units to Commercial Products Division without interfering with regular sales and without incurring additional fixed costs. Also, assume Receiver Division can avoid $7 in variable costs on transfers within the company due to reduced shipping and selling costs. From the firm's perspective, what is the financial advantage or disadvantage of internal trade at WDW Inc.? $35,000 financial disadvantage O None of the above O $210,000 financial advantage $175,000 financial disadvantage O $250,000 financial advantage
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