Reference no: EM132951257
The Wire Products Division of Whitney Wire Corporation produces "bales" of steel wire that are used in various commercial applications. The bales sell for an average of $20 each and The Wire Products Division has the capacity to produce 10,000 bales per month. The Consumer Products Division of Whitney Wire Corporation uses approximately 2,000 bales of steel wire each month in its production of various appliances.
The operating information for the Wire Products Division at its present level of operations (8,000 bales per month)follows:
Sales (all external) $160,000
Variable costs per bale:
Production $5
Selling 2
G&A 3
Fixed costs per bale (based on a 10,000 unit capacity):
Production $2
Selling 3
G&A 4
The Consumer Products Division currently pays $15 per bale for wire obtained from its external supplier.
Problem 1: If the Consumer Products Division agrees to pay the Wire Products Division $16 per bale for 2,000 bales this month, what would be Consumer's increase in total profits? If your answer is a DECREASE, indicate this with a negative sign.
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