Division A makes a part with the following characteristics: ...
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Accounting
Division A makes a part with the following characteristics:
| Production capacity in units | 31,000 | units | |
| Selling price to outside customers | $ | 19 | |
| Variable cost per unit | $ | 13 | |
| Total fixed costs | $ | 108,600 | |
Division B, another division of the same company, would like to purchase 18,900 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $15 each.
Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price. If Division A agrees to sell the parts to Division B at $15 per unit, the company as a whole will be:
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