Division A’s cost accounting records show that the cost of its product is $153 per unit—$100 in variable costs and $53 in fixed costs. The market price of the product, $162, barely covers Division A’s cost of production plus its selling and administrative costs. Division A has a maximum capacity of 110,400 units; it is currently producing and selling 75,400 units. Division B makes a product that uses Division A’s product and would like to purchase 10,400 units from Division A for $151. With $44 additional variable costs, Division B produces and sells the product for $232. 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 10,400 units to Division B for $151 each, and Division B produces and sells 10,400 units for $232. b. Division A does not sell to Division B. Division B purchases 10,400 units from an external supplier at $162 each and produces and sells 10,400 units for $232. Increase in corporate income a. $ b. $
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