Answer:
d. $864,000 decrease in profits.
Explanation:
Hinge Division's total cost per unit:
variable $26
fixed $17
total $43
sales price $58
contribution margin $32
profit margin $15
Alternative A Alternative B Differential
intercompany outside amount
money paid to $0 $1,696,000 ($1,696,000)
outside vendor
variable costs $832,000 $0 $832,000
<u>fixed costs $544,000 $544,000 $0</u>
total costs $1,376,000 $2,240,000 ($864,000)
If the hinges are purchased form an outside vendor, the corporation's total profits will decrease by $864,000.
