Should the assembly division purchase from the supplier

Reference no: EM131849912

The Lawnman Corporation, the manufacturer of Easyrider lawnmowers, is a highly decentralized company. Each division manager has full authority for sourcing decisions. The Engine Division of produces the engine for the lawnmower and the Assembly Division produces the lawnmower.

There is a market for the engine as well as the lawnmower. Each of the divisions has been designated as a profit center. The Assembly Division has always purchased 1,000 engines annually from the Engine Division. The Engine Division announced it is increasing it's transfer price to $350.

In response, the Assembly Division was able to locate an external supplier that can provide the required engines for $280 per unit. The Engine Division has an annual production capacity of 1,000 units. Their incremental (variable) cost of producing each engine is $240 and fixed costs are $70.

If the Engine Division does not produce the 1,000 engines, the equipment and facilities would be used for other production operations that would result in annual cash-operating savings of $60,000. Should the Assembly Division purchase from the external supplier? Why?

Reference no: EM131849912

Questions Cloud

Where mistakes were made in the project initially : 1. What went wrong with the project? 2. Where mistakes were made in the project initially?3.How were problems allowed to persist and go uncorrected for ?

How can leaders simultaneously adapt their leadership styles : How can leaders simultaneously adapt their leadership styles to the development levels of individual group members and to the group as a whole?

Write a program that produces a multiplication table : Write a program that produces a multiplication table with 25 rows of computations. Allow the user to input the first and last base values for the multiplication

International business communications : Your coffee franchise cleared for business in all three countries (Saudi Arabia, Mexico, and China). You now have to develop your global franchise team

Should the assembly division purchase from the supplier : The Engine Division of produces the engine for the lawnmower and the Assembly Division produces the lawnmower.

Write an application that will enable a vendor : Write an application that will enable a vendor to see what earnings he can expect to make based on what percentage he marks up an item.

Find the profit or loss from the production and sale : (a) Find the profit or loss from the production and sale of 5 units. (b) How many units will result in a maximum profit?

Write a program that allows the user to input any number : Write a program that allows the user to input any number of hexadecimal characters. Sum the values and display the sum as a hexadecimal value.

Who should lauren hire and why : Who should Lauren hire and why? How do you think an applicant's race should be considered in hiring decisions?

User Account

All Pages