The Post Division of the M

question 3

Multiple Choice

The Post Division of the M.T. Woodhead Company produces basic posts which can be sold to outside customers or sold to the Lamp Division of the M.T. Woodhead Company. Last year the Lamp Division bought all of its 25,000 posts from Post at $1.50 each. The following data are available for last year's activities of the Post Division: The total fixed costs would be the same for all the alternatives considered below.
-Suppose the transfers of posts to the Lamp Division cut into sales to outside customers by 15,000 units.Further suppose that an outside supplier is willing to provide the Lamp Division with basic posts at $1.45 each.If the Lamp Division had chosen to buy all of its posts from the outside supplier instead of the Post Division,the change in net operating income for the company as a whole would have been:

• A)$1,250 decrease
• B)$10,250 increase
• C)$1,000 decrease
• D)$13,750 decrease

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Definitions:

Expansion Theory

The idea that territories and nations should expand their dominion for economic gain, security, or national prestige.

Cold War

A period of geopolitical tension between the Soviet Union and the United States and their respective allies, characterized by threats, propaganda, and other measures short of open warfare, from about 1947 to 1991.

North Atlantic Treaty Organization

A military alliance formed in 1949 by countries in North America and Europe to provide collective security against aggression.

NATO

The North Atlantic Treaty Organization, a military alliance established in 1949 for mutual defense against aggression, comprising member countries from Europe and North America.