The Axle Division of Becker Company produces axles for off-road sport vehicles.One-third of Axle's output is sold to an internal division of Becker; the remainder is sold to outside customers.Axle's estimated operating profit for the year is: The internal division has an opportunity to purchase 10,000 axles of the same quality from an outside supplier on a continuing basis.The Axle Division cannot sell any additional products to outside customers.Should the Becker Company allow its internal division to purchase the axles from the outside supplier at $13.00 per unit?
A)No; making the axles will save Becker $15,000.
B)Yes; buying the axles will save Becker $15,000.
C)No; making the axles will save Becker $30,000.
D)Yes; buying the axles will save Becker $30,000.

Question

Quizplus · Accepted Answer

The internal division should not purchase from the outside supplier because making the axles internally will save Becker $30,000.

The Axle Division of Becker Company Produces Axles for Off-Road