Production capacity Selling price of JS13 to outside customers Variable cost Fixed cost Total fixed costs...

 

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Production capacity Selling price of JS13 to outside customers Variable cost Fixed cost Total fixed costs 45,000 units $120 per unit $67 per unit $15 per unit, at capacity $675,000 Buy Division, another division of the same company, wants to purchase 15,000 units of part OC53 each period from Sell Division. Parts JS13 and OC53 have the same variable cost per unit for Sell Division. Producing Part OC53 will not change Sell Division's total fixed costs. Buy Division is now purchasing Part OC53 from an outside supplier at a price of $87 each. Hence, Buy Division won't pay more than $87 to Sell Division for the same product. Suppose that Sell Division has ample idle capacity to handle all of Buy Division's needs for Part OC53 without any increase in fixed costs and without cutting into current sales to outside customers for Part JS13. If Sell Division refuses to accept the $87 price to produce and sell Part OC53 to Buy Division, Production capacity Selling price of JS13 to outside customers Variable cost Fixed cost Total fixed costs 45,000 units $120 per unit $67 per unit $15 per unit, at capacity $675,000 Buy Division, another division of the same company, wants to purchase 15,000 units of part OC53 each period from Sell Division. Parts JS13 and OC53 have the same variable cost per unit for Sell Division. Producing Part OC53 will not change Sell Division's total fixed costs. Buy Division is now purchasing Part OC53 from an outside supplier at a price of $87 each. Hence, Buy Division won't pay more than $87 to Sell Division for the same product. Suppose that Sell Division has ample idle capacity to handle all of Buy Division's needs for Part OC53 without any increase in fixed costs and without cutting into current sales to outside customers for Part JS13. If Sell Division refuses to accept the $87 price to produce and sell Part OC53 to Buy Division,

Answer rating: 100% (QA)

Situation Overview 1 Production Capacity Sell Division has a production capacity of 45000 units 2 Product Details JS13 Selling price to outside customers is 120 per unit Variable cost is 67 per unit F... View the full answer