Nig Car Company Manufactures Automobiles

question 87

Essay

Nig Car Company manufactures automobiles. The Fastback Car Division sells its cars for $50,000 each to the general public. The fastback cars have manufacturing costs of $30,000 each for variable and $15,000 each for fixed costs. The division's total fixed manufacturing costs are $75,000,000 at the normal volume of 5,000 units.
The Coupe Car Division has been unable to meet the demand for its cars this year. It has offered to buy 1,000 cars from the Fastback Car Division at the full cost of $40,000. The Fastback Car Division has excess capacity and the 1,000 units can be produced without interfering with the current outside sales of 5,000. The 6,000 volume is within the division's relevant operating range.
Explain whether the Fastback Car Division should accept the offer.

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Definitions:

Differential Organization Theory

A theoretical perspective proposing that variations in organizational structure and behavior are responses to differences in external environments.

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The increase in the population and expansion of infrastructure within cities, often leading to economic development as well as environmental and social challenges.

Urban Ecological Succession

A process in urban environments where ecological communities undergo changes over time, often due to human interventions or natural disturbances.

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Individuals residing in small, often remote communities located in countryside areas, typically reliant on agriculture or local trades.