Centurion Inc. manufactures lighting equipment. It consists of several operating divisions within its business. Division A has decided to go outside the company to purchase materials since Division B plans to increase its selling price for the same materials to $200. Information for Division A and Division B is given in the following table. Outside price for materials Division A's annual purchases Division B's variable costs per unit Division B's fixed costs, per unit Division B's capacity utilisation Task: $150 10,000 units $140 $1,250,000 100% 1. Will the company benefit, if division A purchases outside the company? Assume that division B cannot sell its materials to outside buyers. 2. Assume that division B can save $200,000 in fixed costs if it does not manufacture the material for division A. Should division A purchase from the outside market? 3. Assume the situation in task 1. If the outside market value for the materials drops $20, should division A buy from the outside? Explain.
Centurion Inc. manufactures lighting equipment. It consists of several operating divisions within its business. Division A has decided to go outside the company to purchase materials since Division B plans to increase its selling price for the same materials to $200. Information for Division A and Division B is given in the following table. Outside price for materials Division A's annual purchases Division B's variable costs per unit Division B's fixed costs, per unit Division B's capacity utilisation Task: $150 10,000 units $140 $1,250,000 100% 1. Will the company benefit, if division A purchases outside the company? Assume that division B cannot sell its materials to outside buyers. 2. Assume that division B can save $200,000 in fixed costs if it does not manufacture the material for division A. Should division A purchase from the outside market? 3. Assume the situation in task 1. If the outside market value for the materials drops $20, should division A buy from the outside? Explain.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...
Related questions
Question
4
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning