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

question 149

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 would be the monthly operating advantage (disadvantage) of purchasing the goods internally assuming the external supplier increased its price to $50 per kilogram and the Production Division is able to utilize facilities for other operations, resulting in a monthly cash-operating savings of $30 per kilogram?

• A)$1,000,000
• B)$360,000
• C)$(240,000)
• D)$(400,000)
• E)$(640,000)

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Definitions:

Deposit Reached

Achieving the required minimum amount of money in an account to fulfill a particular condition.

Deposit Value

The amount of money placed in an account or invested, which can earn interest over time.

Interest Rate

The fraction at which a lender charges interest to a borrower for the amount of money lent.

Investment Guaranteed

A financial product promising the return of the principal amount plus predetermined earnings, minimizing risk for the investor.