The X division of XYZ Company is currently operating at 60% capacity or 6,000 units. It produces a single product and sells all its production to outside customers for $17.50 per unit. Variable costs are $7 per unit, and fixed costs are $6 per unit at the current production level. Division Y, which currently purchases this product from an outside supplier for $16 per unit, would like to purchase the product from Division X. Division X will operate at 80% capacity to meet outside customers' and Division Y's demand. 1. What will be the increase (decrease) in total company’s profit if Division X transfers to Division Y (in total)?

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Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.