The Airbags Division of Shepparton Motor Assemblies Produces Airbags That

question 107

Essay

The Airbags Division of Shepparton Motor Assemblies produces airbags that are sold to the Assembly Division and to outsiders.Operating data for the Airbags Division for 2017 are as follows:
$$\begin{array} { | l | r | r | } \hline & \text { Internal Sales } & \text { External Sales } \\\hline \text { Sales: } & & \\\hline 150000 \text { airbags at } \$ 20 & \$ 3000000 & \\\hline 100000 \text { airbags at } \$ 24 & & \$ 2400000 \\\hline \text { Variable expenses at } \$ 8 & \underline { 1200000 } & \underline { 800000 } \\\hline \text { Contribution margin } & \$ 1800000 & \$ 1600000 \\\hline \text { Fixed cost (allocated in units) } & \underline { 1500000 } & \underline { 1000000 } \\\hline \text { Operating profit } & \$ 300000 & \$ 600000 \\\hline\end{array}$$
The Assembly Division has just received an offer from an outside supplier to provide airbags at $8.60 each.The manager of Airbags Division is not willing to meet the $17.20 price.She argues that it costs her $18.00 to produce and sell each airbag.Sales to outside customers are at a maximum of 200 000 airbags.
Required:
a.Verify the Airbags Division's $18.00 unit cost figure.
b.Should the Airbags Division meet the outside price of $17.20? Explain.
c.Could the $17.20 price be met and still show a profit for the Airbags Division sales to the Assembly Division? Show calculations.
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Definitions:

Light Pollution

Excessive, misdirected, or intrusive artificial light that can have adverse effects on human health, wildlife, and the ability to observe stars.

Milky Way

The Milky Way is the galaxy that contains our Solar System, characterized by its milky luminescence, which is a band of light formed from stars that cannot be individually distinguished by the naked eye.

Spiral Arm

Regions of stars that extend from the center of spiral galaxies outward, appearing as swirling and prominent features structured around a galactic core.

Water Grabbing

The practice of large-scale acquisition or control of water resources by corporations, governments, or individuals, often at the expense of local communities and ecosystems.