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
$
25
Variable cost per unit
$
19
Total fixed costs
$
107,200
Division B, another division of the same company, would like to purchase 16,500 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $22 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 $22 price internally and Division B continues to buy from the outside supplier, the company as a whole will be:
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