Mar Company has two decentralized divisions, X and Y. Division X has always purchased certain units from Division Y at $75 per unit. Because Division Y plans to raise the price to $100 per unit, Division X is seeking an outside supplier of the part for the old price of $75 per unit. Division Y's costs follow: * Y's variable costs per unit Y's annual fixed costs Y's annual production of these units for X. $70 $15,000 1,000 units If Division X buys from an outside supplier, the facilities Division Y uses to manufacture these units would be idle. What would be the result if the top management of Mar Company insists that Division X purchase from Division Y at a transfer price of $100 per unit? it would provide higher overall company net operating income than the old transfe price of $75 per unit. it would reduce the company's overall profit because Division X should buy from outside suppliers at $75 per unit if possible. it would provide lower overall company net operating income than the old transfer price of $75 per unit. it would be more profitable for the company than allowing X to buy from outside suppliers at $75 per unit.

Mar Company has two decentralized divisions, X and Y. Division X has always purchased certain units from Division Y at $75 per unit. Because Division Y plans to raise the price to $100 per unit, Division X is seeking an outside supplier of the part for the old price of $75 per unit. Division Y's costs follow: * Y's variable costs per unit Y's annual fixed costs Y's annual production of these units for X. $70 $15,000 1,000 units If Division X buys from an outside supplier, the facilities Division Y uses to manufacture these units would be idle. What would be the result if the top management of Mar Company insists that Division X purchase from Division Y at a transfer price of $100 per unit? it would provide higher overall company net operating income than the old transfe price of $75 per unit. it would reduce the company's overall profit because Division X should buy from outside suppliers at $75 per unit if possible. it would provide lower overall company net operating income than the old transfer price of $75 per unit. it would be more profitable for the company than allowing X to buy from outside suppliers at $75 per unit.

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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