Missing information:
Selling price to outside customers $155
Variable cost per unit $70
Fixed cost per unit (based on capacity) $40
Capacity (in units) 62,000
Answer:
the company as a whole will be worse off by $178,500
Explanation:
since the Handle Division has no spare capacity to handle the order from Cabinet Division, it must treat this order as any common sale to an outside client.
outside Cabinet differential
customers Division amount
sales revenue $1,844,500 $1,547,000 ($297,500)
variable costs $833,000 $833,000 $0
<u>fixed costs $476,000 $476,000 $0</u>
total ($297,500)
Handle Division will be worse off by $297,500
Cabinet Division will be better off by = ($140 - $130) x 11,900 = $119,000
net effect on the company = worse off by $178,500
