Question: please help with this practice accounting problem. McBride Company has two divisions, Division C and Division D. Division C manufactures Part C82 and sells it
please help with this practice accounting problem.
McBride Company has two divisions, Division C and Division D. Division C manufactures Part C82 and sells it to Division D, and also sells the same part to the outside market for $72 per unit. Division C has capacity to make 800,000 units of C82 per year. The division's fixed costs are $2, 500.000 per year and its variable costs per unit are as follows: Part C82 is an essential component for Division D's only product; the division sells 250,000 units per year at a price of $130 per unit. Division D's fixed costs are $7,000,000 per year and its variable costs per unit, excluding the cost of Part C82, are as follows: Suppose Division C's demand for C82 from the outside market is currently 300,000 units per year. By how much will McBride's income decrease if Division D purchases its desired 250,000 units of C82 at $72 per unit from the market rather than from Division C? If Division D purchases its desired 250,000 units of C82 at $72 per unit from the market rather than from Division C, McBride's income will decrease by $. Requirement Suppose Division C's demand for C82 from the outside market is currently 300,000 units per year. By how much will McBride's income decrease if Division D purchases its desired 250.000 units of C82 at $72 per unit from the market rather than from Division C? What transfer price(s) would you suggest to Induce both divisions to want Division D to purchase from Division C instead of from the market
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