Centurion Inc. manufactures lighting equipment. It consists of several operating divisions within its business. Division A has decided to go outside the company to purchase materials since Division B plans to increase its selling price for the same materials to $200. Information for Division A and Division B is given in the following table. Outside price for materials Division A's annual purchases Division B's variable costs per unit Division B's fixed costs, per unit Division B's capacity utilisation Task: $150 10,000 units $140 $1,250,000 100% 1. Will the company benefit, if division A purchases outside the company? Assume that division B cannot sell its materials to outside buyers. 2. Assume that division B can save $200,000 in fixed costs if it does not manufacture the material for division A. Should division A purchase from the outside market? 3. Assume the situation in task 1. If the outside market value for the materials drops $20, should division A buy from the outside? Explain.

Centurion Inc. manufactures lighting equipment. It consists of several operating divisions within its business. Division A has decided to go outside the company to purchase materials since Division B plans to increase its selling price for the same materials to $200. Information for Division A and Division B is given in the following table. Outside price for materials Division A's annual purchases Division B's variable costs per unit Division B's fixed costs, per unit Division B's capacity utilisation Task: $150 10,000 units $140 $1,250,000 100% 1. Will the company benefit, if division A purchases outside the company? Assume that division B cannot sell its materials to outside buyers. 2. Assume that division B can save $200,000 in fixed costs if it does not manufacture the material for division A. Should division A purchase from the outside market? 3. Assume the situation in task 1. If the outside market value for the materials drops $20, should division A buy from the outside? Explain.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

what are the solutions for questions 4 & 5?
3. What is the NAV?
But why? for number 3
need help with question 6
Question 4 Listen Which of the following points are on the unit circle? Select all that apply. A (--) B (33.3) C 12 (1/13. 31/3)