Given the Following Data for Keyboard Division The Computer Division Would Like to Purchase 15,000 Units Each

question 81

Multiple Choice

Given the following data for Keyboard Division:
$$\begin{array} { ll} \text { Selling price to outside customers } & \$ 25 \\\text { Variable cost per unit } & \$ 12 \\\text { Total fixed cost } & \$ 50,000 \\\text { Capacity (in units) } & 125,000\end{array}$$
The Computer Division would like to purchase 15,000 units each period from the Keyboard Division. The Keyboard Division has ample excess capacity to handle all of the Computer Division's needs. The Computer Division now purchases from an outside supplier at a price of $20. If the Keyboard Division refuses to accept an $18 price internally, the company, as a whole, will be worse off by:

• A) $30,000.
• B) $75,000.
• C) $90,000.
• D) $120,000.

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Definitions:

Conspicuous Waste

The act of spending money on and acquiring luxury goods and services to publicly display economic power.

Conspicuous Consumption

The practice of purchasing goods or services for the direct purpose of displaying wealth or social status rather than for practical reasons.

Leisure Class

A social class that has the means to live without the necessity for active economic productivity, often associated with conspicuous consumption and leisurely lifestyles.

Veblen

Pertains to theories or concepts related to economist Thorstein Veblen, especially concerning conspicuous consumption and social status.