Division X makes a part with the following characteristics: Production capacity 25,000unitsSelling price to outside customers$18 Variable cost per unit$11 Fixed costs, total$100,000 Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division X refuses to accept the $17 price internally and Division Y continues to buy from the outside supplier, the company as a whole will be:
A. worse off by $20,000 each period.
B. worse off by $70,000 each period.
C. worse off by $60,000 each period.
D. better off by $60,000 each period.
E. better off by $10,000 each period.
Answer: C
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