Given the following data for Keyboard Division:
$$\begin{array} { ll}
\text { Selling price to outside customers } & \$ 25 \
\text { Variable cost per unit } & \$ 12 \
\text { Total fixed cost } & \$ 50,000 \
\text { Capacity (in units) } & 125,000
\end{array}$$
The Computer Division would like to purchase 15,000 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 $20. If the Keyboard Division refuses to accept an $18 price internally, the company, as a whole, will be worse off by:
A) $30,000.
B) $75,000.
C) $90,000.
D) $120,000.

Question

Given the following data for Keyboard Division:
$$\begin{array} { ll} 
\text { Selling price to outside customers } & \$  25 \
\text { Variable cost per unit } & \$  12 \
\text { Total fixed cost } & \$  50,000 \
\text { Capacity (in units) } & 125,000
\end{array}$$
The Computer Division would like to purchase 15,000 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 $20. If the Keyboard Division refuses to accept an $18 price internally, the company, as a whole, will be worse off by:
A) $30,000.
B) $75,000.
C) $90,000.
D) $120,000.

Quizplus · Accepted Answer

The Answer of Given the following data for Keyboard Division:
$$\begin{array} { ll} 
\text { Selling price to outside customers } & \$  25 \
\text { Variable cost per unit } & \$  12 \
\text { Total fixed cost } & \$  50,000 \
\text { Capacity (in units) } & 125,000
\end{array}$$
The Computer Division would like to purchase 15,000 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 $20. If the Keyboard Division refuses to accept an $18 price internally, the company, as a whole, will be worse off by:
A) $30,000.
B) $75,000.
C) $90,000.
D) $120,000.

Given the Following Data for Keyboard Division The Computer Division Would Like to Purchase 15,000 Units Each