Question
You have been provided with the following information for Division X of a decentralized company: Selling price per unit = $90 Variable cost per unit
You have been provided with the following information for Division X of a decentralized company: Selling price per unit = $90 Variable cost per unit = $66 Fixed cost per unit = $20 Sales volume (units) to external customers = 22,500 Capacity (units) = 25,000 Division Y of the same company would like to purchase all of its units internally. However, it currently pays $95 per unit to an outside firm. a) If Division Y needs 2,000 units each period, what is the lowest price that Division X should accept from Division Y? b) If Division Y needs 6,000 units each period, what is the lowest price that Divsion X should accept from Division Y? c) If Division X's capacity is instead only 22,500 and division X needs 2,000 units each period, what is the lowest price that Division X should accept from Division Y? d) What is the maximum price that Division Y should pay to Division X?
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