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The Axle Division of Becker Company Produces Axles for Off-Road

question 19

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The Axle Division of Becker Company produces axles for off-road sport vehicles.One-third of Axle's 30,000 unit output is sold to an internal division of Becker; the remainder is sold to outside customers.Axles' estimated operating profit for the year is: The internal division has an opportunity to purchase 10,000 axles of the same quality from an outside supplier on a continuing basis.The purchase price would be $13.00.If the Axle Division is now operating at full capacity and can sell all its units to outside customers at the present selling price,what is the differential cost to Becker of requiring that the axles be made internally and sold to the internal division?

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Definitions:

Financial Statements

Documents that outline the financial activities and condition of a business, including the income statement, balance sheet, and cash flow statement.

Company Accounts

Financial records that detail the financial activities and condition of a business.

Business Transactions

Exchanges involving economic consideration between two entities that affect the financial position of a business.

Debits

Entries that are recorded on the left side of a ledger account which increase asset or expense accounts, or decrease liability, equity, or revenue accounts.

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