Business, 25.04.2020 01:46 lifeofabe214

Lock Division of Morgantown Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 sells for $40, has a variable cost of $22, and a fixed cost per unit of $10. The Lock Division has a capacity to produce 100,000 units per period. The Cabinet Division currently purchases 10,000 units of part Z-25 from the Lock Division for $40. The Cabinet Division has been approached by an outside supplier willing to supply the parts for $36. What is the effect on Morgantown's overall profit if the Lock Division refuses to lower its price and the Cabinet Division decides to buy from outside? A. No change in Morgantown's profits. B. $140,000 decrease in Morgantown's profits. C. $80,000 decrease in Morgantown's profits. D. $40,000 increase in Morgantown's profits. 9. Now, assume that the Lock Division lowers its price to match the outside price and the Cabinet Division continues to buy inside. What is the effect on Morgantown's overall profit? A. No change in Morgantown's profits. B. $140,000 decrease in Morgantown's profits. C. $80,000 decrease in Morgantown's profits. D. $40,000 increase in Morgantown's profits.

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Lock Division of Morgantown Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 s...

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