Division a Makes a Part with the Following Characteristics

question 11

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*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:

Building a Protein

The process of translating mRNA into a polypeptide chain, which then folds into a functional protein.

Enzymes

Biological catalysts that speed up chemical reactions in living organisms without being consumed in the process.

Coupled Reaction

A chemical reaction that is driven by another reaction, utilizing the energy released from one reaction to drive another.

Energy

The capacity to do work or produce change, existing in various forms such as kinetic, potential, thermal, electrical, and chemical energy.