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 | 31,100 | units | |
| Selling price to outside customers | $ | 22 | |
| Variable cost per unit | $ | 15 | |
| Total fixed costs | $ | 102,300 | |
Division B, another division of the same company, would like to purchase 13,700 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $19 each.
Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division A refuses to accept the $19 price internally and Division B continues to buy from the outside supplier, the company as a whole will be:
Multiple Choice
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worse off by $54,800 each period.
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worse off by $41,100 each period.
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worse off by $82,200 each period.
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worse off by $95,900 each period.
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