The Tire Division of Traker Company Produces Tires for Off-Road

question 112

Multiple Choice

The Tire Division of Traker Company produces tires for off-road sport vehicles. One-third of Tire's output is sold to an internal division of Traker; the remainder is sold to outside customers. Tire's estimated operating profit for the year is:
$\begin{array}{lrr}&\text {Internal}&\text { Outside}\\ \text {Sales } &\$150,000&\$40,000\\ \text { Variable costs } &100,000&200,000\\ \text { Fixed costs} &\underline{30,000}&\underline{60,000}\\ \text { Operating profits} &\underline{\$20,000}&\underline{\$140,000}\\ \text {Unit sales } &10,000&20,000\\\end{array}$

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The internal division has an opportunity to purchase 10,000 tires of the same quality from an outside supplier on a continuing basis. The Tire Division cannot sell any additional products to outside customers. Should Traker Company allow its internal division to purchase the tires from the outside supplier at $13.00 per unit?

• A) No; making the tires will save Traker $15,000.
• B) Yes; buying the tires will save Traker $15,000.
• C) No; making the tires will save Traker $30,000.
• D) Yes; buying the tires will save Traker $30,000.

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Definitions:

New Values

The development or adoption of beliefs, principles, or standards that differ from existing ones, reflecting changes in societal, organizational, or individual perspectives.

New Culture

The development or adoption of new norms, values, attitudes, and practices within an organization or society.

Kilmann-Saxton Culture-Gap

A diagnostic tool used to identify discrepancies between the current and the ideal organizational culture, facilitating targeted interventions.

Long-Term Technical Norms

Established standards and practices in technology that sustain over an extended period.