Division a Makes a Part with the Following Characteristics

question 3

Multiple Choice

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each.
-Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division B continues to purchase parts from an outside supplier rather than from Division A, the company as a whole will be:

• A) worse off by $30,000 each period.
• B) worse off by $10,000 each period.
• C) better off by $15,000 each period.
• D) worse off by $35,000 each perioD.Purchasing from outside supplier costs $6 more than producing internally would ($24 - $18). The total for all 5,000 parts is $6 x 5,000 = $30,000. Therefore, if the company continues to purchase from the outside supplier, it will be $30,000 worse off.

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Definitions:

Daily Basis

A frequency or routine in which activities or tasks are conducted every day.

Winter Olympics

A multi-sport event held every four years, featuring winter sports competitions where athletes from various countries participate.

Predicted Values

The outcomes estimated by a statistical model, based on certain input variables.

Medals

Awards given for achieving a high level of performance in a particular event, often used in the context of sports or competitions.