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Would it be more profitable for the company

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The Domino Company has two decentralized divisions, A and B. Division A has always purchased certain units from Division B at $75 per unit. Because Division B plans to raise the price to $100 per unit, Division A desires to purchase these units from outside suppliers for $75 per unit. Ilivision B's costs follow:

Division B's variable costs per unit

$70

Division B's annual fixed costs

$15,000

Division A's purchase

1,000 units

If Division A buys from an outside supplier, the facilities Division B uses to manufacture these units will remain idle. Would it be more profitable for the company to enforce the $100 transfer price than to allow Division A to buy from outside suppliers at $75 per unit?

Reference no: EM13511756

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