Division A’s cost accounting records show that the cost

| June 14, 2018

Division A’s cost accounting records show that the cost of its product is $150 per unit—$106 in variable costs and $44 in fixed costs. The market price of the product, $170, barely covers Division A’s cost of production plus its selling and administrative costs. Division A has a maximum capacity of 101,000 units; it is currently producing and selling 79,000 units. Division B makes a product that uses Division A’s product and would like to purchase 10,100 units from Division A for $153. With $43 additional variable costs, Division B produces and sells the product for $261. Division A’s manager is not happy with Division B’s offer and is refusing to sell.Calculate the increase in corporate income in the following situations:a.Division A sells 10,100 units to Division B for $153 each, and Division B produces and sells 10,100 units for $261.b.Division A does not sell to Division B. Division B purchases 10,100 units from an external supplier at $170 each and produces and sells 10,100 units for $261.Increase in corporate incomea.$b.$

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