Use the Information Below to Answer the Following Question(s)

question 53

Multiple Choice

Use the information below to answer the following question(s) .Soft Cushion Company is highly decentralized.Each division is empowered to make its own sales decisions.The Assembly Division can purchase cushion stuffing from the Production Division or from external suppliers.The Production Division has been the major supplier of stuffing in recent years.The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $20 per kilogram for the next year.The Production Division recently increased its unit price to $40.The manager of the Production Division presented the following information; variable cost $32, fixed cost $8, to top management in order to attempt to force the Assembly Division to purchase the stuffing internally.The Assembly Division purchases 20,000 kg per month.
-What is the monthly operating advantage (disadvantage) of purchasing the goods internally assuming the Production Division is able to utilize the facilities for other operations resulting in monthly cash-operating savings of $40,000?

• A)$440,000
• B)$40,000
• C)$280,000
• D)$(280,000)
• E)$(360,000)

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Definitions:

Litigation

The process of taking legal action; the series of actions involved in suing someone or responding to a lawsuit.

Arbitration

Arbitration is a form of alternative dispute resolution where a neutral third party makes a binding decision to resolve a dispute, outside of court.

Environmental Disputes

Conflicts arising from the impact of human activities on the natural environment, often involving issues of conservation, pollution, and resource management.

Insurance Liability

Refers to the obligation of an insurance company to cover losses as defined in an insurance policy.