Chipper Division of Acme Corp

question 70

Multiple Choice

Chipper Division of Acme Corp.sells 80,000 units of part Z-25 to the outside market.Part Z-25 sells for $40,has a variable cost of $22,and a fixed cost per unit of $10.Chipper has a capacity to produce 100,000 units per period.Jones Division currently purchases 10,000 units of part Z-25 from Chipper for $40.Jones has been approached by an outside supplier willing to supply the parts for $36.What is the effect on Acme's overall profit if Chipper REFUSES the outside price and Jones decides to buy outside?

• A)no change
• B)$140,000 decrease in Acme profits
• C)$80,000 decrease in Acme profits
• D)$40,000 increase in Acme profits

---

Definitions:

Seed Stage

An early phase of a startup's lifecycle where the focus is on product development and initial market research, often funded by seed capital.

Capital Commitments

Obligations of a company to spend capital in the future for the purchase of assets or for investment purposes.

Entrepreneurial Team

A group of individuals with complementary skills and a shared vision, working together to launch and develop a new business venture.

Economically Viable

An initiative, project, or business is considered economically viable if it has the potential to generate enough revenue or benefits to cover its expenses and provide a return on investment.