Adams Company has two divisions, A and B. Division A manufactures 6,100 units of product per month. The cost per unit is calculated as follows. Variable costs Fixed costs Total cost $ 7.10 20.70 $ 27.80 Division B uses the product created by Division A. No outside market for Division A's product exists. The fixed costs incurred by Division A are allocated using headquarters-level facility-sustaining costs. The manager of Division A suggests that the product be transferred to Division B at a price of at least $27.80 per unit. The manager of Division B argues that the same product can be purchased from another company for $18.50 per unit and requests permission to do so. Required a-1. How much would Adams gain or lose per unit if Division B were to purchase the product from the outside company for $18.50 per unit? Note: Round your answer to 2 decimal places. a-2. Is it in the best interest of Adams Company for Division B to purchase the product from an outside company?

Adams Company has two divisions, A and B. Division A manufactures 6,100 units of product per month. The cost per unit is calculated as follows. Variable costs Fixed costs Total cost $ 7.10 20.70 $ 27.80 Division B uses the product created by Division A. No outside market for Division A's product exists. The fixed costs incurred by Division A are allocated using headquarters-level facility-sustaining costs. The manager of Division A suggests that the product be transferred to Division B at a price of at least $27.80 per unit. The manager of Division B argues that the same product can be purchased from another company for $18.50 per unit and requests permission to do so. Required a-1. How much would Adams gain or lose per unit if Division B were to purchase the product from the outside company for $18.50 per unit? Note: Round your answer to 2 decimal places. a-2. Is it in the best interest of Adams Company for Division B to purchase the product from an outside company?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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