The Hammer Division of Excel Company Produces Hardened Sledge Hammers

question 76

Multiple Choice

The Hammer Division of Excel Company produces hardened sledge hammers. One-third of Hammer's output is sold to the Government Products Division of Excel; the remainder is sold to outside customers. Hammer's estimated operating profit for the year is: $\begin{array}{lrr}&\text { Government }\\&\text { Products } & \text { Outside } \\&\text { Division } & \text { Customers }\\ \text { Sales } &\$15,000&\$40,000\\ \text {Variable costs } &(10,000) &(20,000) \\ \text { Fixed costs } &\underline{(3,000) }&\underline{(6,000) }\\ \text { Operating profits } &\underline{\underline{\$2,000}}&\underline{\underline{\$14,000}}\\ \text { Unit sales} &10,000&20,000\\\end{array}$
The Government Products Division has an opportunity to purchase 10,000 hammers of the same quality from an outside supplier on a continuing basis. The Hammer Division cannot sell any additional products to outside customers. Should the Excel Company allow its Government Products Division to purchase the hammers from the outside supplier at $1.25 per unit?

• A) No; making the hammers will save Excel $1,500.
• B) Yes; buying the hammers will save Excel $1,500.
• C) No; making the hammers will save Excel $2,500.
• D) Yes; buying the hammers will save Excel $2,500.

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Definitions:

Unethical Behaviour

Actions or practices that violate moral norms, legal statutes, or social standards, often to gain unfair advantages.

Sexual Harassment

Unwanted and inappropriate sexual advances, comments, or behaviors in a professional or social setting.

Performance Pressure

The stress or anxiety individuals may feel when they are expected to perform at a high level, often leading to fear of failure.

Unethical Behaviour

Actions that violate moral or professional guidelines, often to gain a personal or organizational advantage.