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

question 96

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.
-The Production Division has no alternative use for the facilities used to manufacture the stuffing.What is the monthly operating income advantage (disadvantage) if the goods are purchased internally?

• A)$400,000
• B)$640,000
• C)$240,000
• D)$(240,000)
• E)$(400,000)

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Definitions:

Regression Equation

An equation in mathematics employed to forecast the value of a dependent variable using one or more independent variables.

Unit Increase

A single increment or step up in quantity, size, or number in a given context.

Holding Constant

A method in analysis where certain variables are kept unchanged to isolate the effect of other variables.

Second-order Model

A statistical or mathematical model that includes not only the main effects but also their interactions and quadratic terms, enabling the capture of curvature in the data relationships.