Production capacity. ....... Selling price to outside customers...... Variable cost per unit. Fixed cost, total ***** 25,000 units $18 $11 $100,000

Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 53P: Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The...
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### Division X Production and Sales Analysis

Division X produces a part characterized by the following details:

- **Production capacity**: 25,000 units
- **Selling price to outside customers**: $18 per unit
- **Variable cost per unit**: $11 per unit
- **Fixed cost, total**: $100,000

---

Division Y, another segment of the same company, requires 10,000 units each period from Division X. Currently, Division Y procures this part from an external supplier at a rate of $17 per unit.

Given the scenario where Division X is functioning at full capacity and is able to sell all of its output to external customers, we need to analyze the impact on the company if Division X sells the parts to Division Y at $17 per unit.

### Decision Scenario

**Question**:
If Division X operates at full capacity and sells the parts to Division Y at $17 per unit, how will this impact the company overall?

**Options**:
a. Better off by $10,000 each period.
b. Worse off by $20,000 each period.
c. Worse off by $10,000 each period.
d. There will be no change in the status of the company as a whole.

---

In this problem, detailed calculations should be done to determine the total impact, considering the difference between internal transfer pricing and external selling prices, as well as fixed and variable costs.
Transcribed Image Text:### Division X Production and Sales Analysis Division X produces a part characterized by the following details: - **Production capacity**: 25,000 units - **Selling price to outside customers**: $18 per unit - **Variable cost per unit**: $11 per unit - **Fixed cost, total**: $100,000 --- Division Y, another segment of the same company, requires 10,000 units each period from Division X. Currently, Division Y procures this part from an external supplier at a rate of $17 per unit. Given the scenario where Division X is functioning at full capacity and is able to sell all of its output to external customers, we need to analyze the impact on the company if Division X sells the parts to Division Y at $17 per unit. ### Decision Scenario **Question**: If Division X operates at full capacity and sells the parts to Division Y at $17 per unit, how will this impact the company overall? **Options**: a. Better off by $10,000 each period. b. Worse off by $20,000 each period. c. Worse off by $10,000 each period. d. There will be no change in the status of the company as a whole. --- In this problem, detailed calculations should be done to determine the total impact, considering the difference between internal transfer pricing and external selling prices, as well as fixed and variable costs.
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