Division A makes a part with the following characteristics: Division B, another

Question

Division A makes a part with the following characteristics:

Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 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 sells the parts to Division B at $24 per unit (Division B's outside price), the company as a whole will be:



a. better off by $5,000 each period.

b. worse off by $15,000 each period.

c. worse off by $5,000 each period.

d. There will be no change in the status of the company as a whole.

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 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 sells the parts to Division B at $24 per unit (Division B's outside price), the company as a whole will be: a. better off by $5,000 each period. b. worse off by $15,000 each period. c. worse off by $5,000 each period. d. There will be no change in the status of the company as a whole.

Explanation / Answer

the better off by $ 5000 each period beacuse division B already get at $24 from outside supplier. so division A can increase its profit by selling outside,so the overall profit will increase

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