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    Make vs. Buy Decision

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    Materials used by Aero-Products Inc. in producing Division 3's product are currently purchasing from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much would Division 3's income from operations increase?

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    https://brainmass.com/business/accounting/make-vs-buy-decision-45171

    Solution Preview

    Materials used by Aero-Products Inc. in producing Division 3's product are currently purchasing from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused ...

    Solution Summary

    Calculates increase in income from operations if materials are produced internally rather than purchased from outside.

    $2.19

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