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:

Protestant Ethic

A concept in sociology that relates Protestantism to a strong work ethic, frugality, and the economic success of Protestant communities.

Spirit of Capitalism

A term popularized by sociologist Max Weber to describe the set of values and attitudes endorsing hard work, thrift, and efficiency in one’s calling, which he believed underpinned capitalist societies.

Max Weber

A sociologist, philosopher, and political economist from Germany whose concepts significantly impacted the fields of social theory and research.

Benevolence

The quality of being well-meaning; kindness and generosity toward others.