Hefner Corporation Hefner Corporation Is Comprised of Two Divisions: X and Y

question 67

Essay

Hefner Corporation
Hefner Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of the units it can produce (25,000 per year) to external customers for $25 per unit. At this level of activity, X's per unit costs are:
Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each.
Refer to Hefner Corporation. What will be the effect on overall corporate profits if the two divisions agree to an internal transfer of 5,000 units?

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Definitions:

Stethoscope

A medical instrument for listening to the action of someone's heart or breathing.

Physician

A medical professional trained to diagnose, treat, and prevent illnesses, and provide patient care.

Month

A unit of time, typically used in calendars, that roughly corresponds to the period required for the moon to orbit the Earth.

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Membranous regions found in the skull of infants; permit the skull to move through the birth canal.