Mar Company has two decentralized divisions, X and Y. Division X has always purchased certain units...

Transcribed Image Text:

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? 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?