The Fabrication Division of American Car Company Has Offered to Purchase

question 115

Essay

The Fabrication Division of American Car Company has offered to purchase 90,000 batteries from the Electrical Division for $104 per unit.At a normal volume of 250,000 batteries per year,production costs per battery are as follows:
$$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 40 \\\hline \text { Direct manufacturing labor } & 30 \\\hline \text { Variable factory overhead } & 12 \\\hline \text { Fixed factory overhead } & \underline { 40 } \\\hline \text { Total } & \$ 112 \\\hline\end{array}$$ The Electrical Division has been selling 250,000 batteries per year to outside buyers at $136 each; capacity is 350,000 batteries per year.The Fabrication Division has been buying batteries from outside sources for $130 each.
Required:
a.Should the Electrical Division manager accept the offer? Explain.
b.From the company's perspective,will the internal sales be of any benefit? Explain.

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Definitions:

Unconscious Conflicts

Internal struggles, often stemming from childhood, that lie outside of an individual's conscious awareness but influence emotions and behavior.

Childhood Drives

Pertains to the innate impulses and desires that influence behavior in early development stages.

Proprium

The aspect of an individual's personality that is considered to be the self, or the core of one's personal identity.

Positive Psychological Growth

A concept in psychology that refers to an individual's capability to improve their outlook, abilities, and overall psychological state in response to life's challenges and changes.