Given the Following Data for Handle Division The Cabinet Division Would Like to Purchase 10,000 Units from r

question 16

Multiple Choice

Given the following data for Handle Division:
$$\begin{array} { l r } \text { Selling price to outside customers } &\$ 150 \\\text { Variable cost per unit } & 80 \\\text { Fixed cost per unit (based on capacity) } & 30 \\\text { Capacity (in units) } & 50,000\end{array}$$
The Cabinet Division would like to purchase 10,000 units from the Handle Division at a price of $125 per unit. Handle Division has no excess capacity to handle the Cabinet Division's requirements. The Cabinet Division currently purchases from an outside supplier at a price of $140. If the Handle Division accepts a $125 price internally, the company, as a whole, will be better or worse off by:

• A) $600,000
• B) $(100,000)
• C) $115,000
• D) $250,000

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Definitions:

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