XYZ Corporation has a company with two divisions. Division A manufactures a product that has...
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Accounting
XYZ Corporation has a company with two divisions. Division A manufactures a product that has a variable cost of $6, sales price to the market of $12 and has a capacity to produce 30,000 units and its fixed costs are $60,000. Current production is 20,000 units.
a) 6% - Division B wants to purchase from Division A 5000 units at $7 per unit. Currently it pays $10 per unit to purchase these units from the market. What would you advise the company and Division A to do and why. Support your answer with calculations.
b) 6% - If an outside company wanted to purchase the 5000 units for $7, what would you advise the company and Division A to do?
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