Business, 06.05.2020 16:00 nbnb8831

Kelowna Company has two divisions, A and B. Division A manufactures 12,000 units of product per month. The cost per unit is calculated as follows. Variable costs $ 10 Fixed costs 20 Total cost $ 30 Division B uses the product created by Division A. No outside market for Division A’s product exists. The fixed costs incurred by Division A are allocated headquarters-level facility-sustaining costs. The manager of Division A suggests that the product be transferred to Division B at a price of at least $30 per unit. The manager of Division B argues that the same product can be purchased from another company for $26 per unit and requests permission to do so. Required a-1. How much would the division gain or lose if Division B were to purchase the product from the outside company for $26 per unit? a-2. Is it in the best interest of Kelowna Company for Division B to purchase the product from an outside company?

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Kelowna Company has two divisions, A and B. Division A manufactures 12,000 units of product per mont...

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