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question 12

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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.
-The seller of product A has no idle capacity and can sell all it can produce at $20 per unit.Outlay cost is $4.What is the opportunity cost assuming the seller sells internally?

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Definitions:

Debt/Equity Ratio

A gauge illustrating the financial reliance of a company on debt versus equity for asset support.

Long-Term Debt Ratio

The long-term debt ratio measures the proportion of a company's total debt that is due in more than one year, indicating the extent to which a company relies on long-term borrowing for its financing needs.

Total Debt

The sum of all owed money by an entity, including short-term and long-term liabilities.

Receivable Turnover

A financial ratio that measures how efficiently a company collects its accounts receivable.

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