Division T of Clocker Company makes a timer which it sells for $35 to outside customers. The division has supplied the following data concerning the timer: |
Monthly capacity | 25,000 times |
Variable cost per unit | $18 per timer |
Fixed cost per unit | $5 per timer |
Division S of Clocker Company is currently buying 10,000 similar timers each month from an overseas supplier at $32 each. Division S would like to acquire its timers from Division T if the price is right. |
Suppose Division T is operating at capacity and can sell all of the timers it produces to outside customers at its usual selling price. If Division T meets the price of the overseas supplier and sells 10,000 timers to Division S each month, the effect on the monthly net operating income of the company as a whole will be: |
rev: 02_05_2016_QC_CS-40277
increase of $30,000
decrease of $30,000
decrease of $140,000
increase of $170,000
Sales price to outside customers | 35 |
Less: Cost from overseas supplier | 32 |
Net Contribution margin lost per unit | 3 |
X Number of units | 10000 |
Decrease in monthly net operating income | 30000 |
Option 2 decrease of $30,000 is correct |
Division T of Clocker Company makes a timer which it sells for $35 to outside customers....
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