What would be recommendation to division a

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Reference no: EM132536049

Division A of Daku Corporation likes to purchase product ACE-23 form Division B of the corporation. Division A is currently purchasing 20,000 untis of ACE-23 from an outside at a unit cost of P50, less a 5% quantity discount.

Other relevant information are provided below.

Unit sales price on the intermediate market P50

Unit variable cost 24

Fixed costs per unit (based on capacity) 12

Normal capacity 70,000

Required:

Question 1: Suppose Division A can purchase the 20,000 material Ace-23 from a new supplier for P44, net of discount, what would be your recommendation to Division A, buy from Division B or from a new supplier, and a what price. (In your recommendation, the company's overall should be considered):

1. Assuming, Division B has excess capacity.

2. Assuming Division B has no excess capacity.

Reference no: EM132536049

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