Solomon Company has two divisions, A and B. Division A manufactures 6,600 units of product per month. The cost per unit iscalculated as follows.Variable costsFixed costsTotal cost$ 6.7019.20$ 25.90Division B uses the product created by Division A. No outside market for Division A's product exists. The fixed costs incurred byDivision A are allocated using headquarters-level facility-sustaining costs. The manager of Division A suggests that the product betransferred to Division B at a price of at least $25.90 per unit. The manager of Division B argues that the same product can bepurchased from another company for $18.30 per unit and requests permission to do so.Required6-1. How much would Solomon gain or lose per unit if Division B were to purchase the product from the outside company for $18.30per unit?Note: Round your answer to 2 decimal places.6-2. Is it in the best interest of Solomon Company for Division B to purchase the product from an outside company?a-1. Solomon's gain or lossper unita2. Should Solomon purchase the product from outside?

Approach to solving the question: I have provided an explanation and reasoning for the values used…

Answered: Solomon Company has two divisions, A…

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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