# Solved: Truball Inc., Which Manufactures Sports Equipment, Consists Of Several Operating Divisions. Division A Has Decided To Go Outside The Company To Buy Materials Since Division B Plans To Increase

By |

Truball Inc., which manufactures sports equipment, consists of several operating divisions. Division A has decided to go outside the company to buy materials since division B plans to increase its selling price for the same materials to \$200. Information for division A and division B follows: Outside price for materials Division A's annual purchases Division B's variable costs per unit \$100 5,000 units \$90 Division B's fixed costs, per year \$1,150,000 Division B's capacity utilization 1008 Required: 1. Assume that division B cannot sell its materials to outside buyers. Calculate the net cost or benefit to the company as a whole if Division A purchases the materials outside the company. 2-a. Assume that division B can save \$160,000 in fixed costs if it does not manufacture the material for Division A. Calculate the net cost or benefit to the company as a whole for A to purchase outside the company. 2-b. From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market? 3-a. Assume the situation in Requirement 1. If the outside market value for the materials drops \$15, calculate the net cost or benefit to the company as a whole for A to purchase outside the company. 3-b. From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market? Complete this question by entering your answers in the tabs below. Req 3A Req 3B Req 1 Req 2A Req 2B Assume that division B cannot sell its materials to outside buyers. Calculate the net cost or benefit to the company as a whole if Division A purchases the materials outside the company. (Enter all the amounts as positive value.) Req 1 > Req 2A Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 3A Req 3B Assume that division B can save \$160.000 in fixed costs if it does not manufacture the material for Division A, Calculate the net cost or benefit to the company as a whole for A to purchase outside the company. (Enter all the amounts as positive value.) Req 1 Req 2B Req 3B Req 1 Req 2A Req 2B Req 3A From the standpoint of the effect of the transaction on the company as a whole, should Division A purchase from the outside market? OYes ONo Req 3A Req 2A Req 1 Req 2A Req 2B Req 3A Req 3B Assume the situation in Requirement 1. If the outside market value for the materials drops \$15, calculate the net cost benefit to the company as a whole for A to purchase outside the company. (Enter all the amounts as or positive value.) > Req 2B Req 3B Req 2B Req 3A Req 3B Req 1 Req 2A From the standpoint of the effect of the transaction on the company as a market? whole, should Division A purchase from the outside Yes ONo Req 3A Req 3B