Blue Co has two divisions, A and B Division A makes a component for air conditioning units which it can only sell to Division B It has no other outlet for sales Current information relating to Division A is as follows Marginal cost per unit 100 Transfer price of the component 165 Total production and sales of the component each year 2,200 units Specific fixed costs of Division A per year 10,000 Green Co has offered to sell the component to Division B for 140 per unit If Division B accepts this offer, Division A will be closed If Division B accepts Green Cos offer, what will be the impact on profits per year for the group as a whole

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Question: Blue Co has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B.

Blue Co has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B. It has no other outlet for sales.

Current information relating to Division A is as follows:

Marginal cost per unit	100
Transfer price of the component	165
Total production and sales of the component each year	2,200 units
Specific fixed costs of Division A per year	10,000

Green Co has offered to sell the component to Division B for 140 per unit.

If Division B accepts this offer, Division A will be closed. If Division B accepts Green Cos offer, what will be the impact on profits per year for the group as a whole?

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