Division X makes a part with the following characteristics: Production capacity
ID: 2385424 • Letter: D
Question
Division X makes a part with the following characteristics:
Production capacity 34,200 units
Selling price to outside customers $22
Variable cost per unit $17
Fixed cost, total $102,000
Division Y of the same company would like to purchase 12,800 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $20 each.
Suppose that Division X is operating at capacity and can sell all of its output to outside customers. If Division X sells the parts to Division Y at $20 per unit, the company as a whole will be:
There will be no change in the status of the company as a whole.
worse off by $25? each period.
better off by $25? each period.
worse off by $51&.
Explanation / Answer
better off by $25? each period.