In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits.
|Capacity in units||103,000||94,000|
|Number of units being sold to outside customers||103,000||71,000|
|Selling price per unit to outside customers||$||55||$||34|
|Variable costs per unit||$||22||$||15|
|Fixed costs per unit (based on capacity)||$||9||$||5|
|Number of units needed for production||23,000||23,000|
|Purchase price per unit now being paid to an outside supplier||$||48||$||30|