Multiple Choice
Division A makes a part with the following characteristics:
Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each.
-Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price.If Division A sells the parts to Division B at $24 per unit (Division B's outside price) ,what will be the effect on the operating income of company as a whole?
A) Higher by $5,000 each period.
B) Lower by $15,000 each period.
C) Lower by $5,000 each period.
D) There will be no change in the status of the company as a whole.
Correct Answer:
Verified
Correct Answer:
Verified
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