Question

The Computer Division would like to purchase 17,000 units each period from the Keyboard Division. The Keyboard Division has ample excess capacity to handle all of the Computer Division's needs. The Computer Division now purchases from an outside supplier at a price of $37. If the Keyboard Division refuses to accept an $35 price internally, the company, as a whole, will be worse off by:

Answer 1

$136,000

Step-by-step explanation:

Calculation to determine how much will the company, as a whole, will be worse off by

Using this formula

Worse off amount =(Purchases from an outside supplier -Variable cost per unit)*Units purchased

Let plug in the formula

Worse off amount =($37-$29)*17,000

Worse off amount =$8*17,000

Worse off amount =$136,000

Therefore the company, as a whole, will be worse off by $136,000