Chipper Division of Acme Corp

question 74

Multiple Choice

Chipper Division of Acme Corp.sells 80,000 units of part Z-25 to the outside market.Part Z-25 sells for $40,has a variable cost of $22,and a fixed cost per unit of $10.Chipper has a capacity to produce 100,000 units per period.Jones Division currently purchases 10,000 units of part Z-25 from Chipper for $40.Jones has been approached by an outside supplier willing to supply the parts for $36.What is the effect on Acme's overall profit if Chipper ACCEPTS the outside price and Jones continues to buy inside?

• A)No change.
• B)$140,000 decrease in Acme profits.
• C)$80,000 decrease in Acme profits.
• D)$40,000 increase in Acme profits.

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