Hefner Corporation
Hefner Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of the units it can produce (25,000 per year) to external customers for $25 per unit. At this level of activity, X's per unit costs are:
Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each.
Refer to Hefner Corporation. What will be the effect on overall corporate profits if the two divisions agree to an internal transfer of 5,000 units?

Question

Hefner Corporation
Hefner Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of the units it can produce (25,000 per year) to external customers for $25 per unit. At this level of activity, X's per unit costs are:
  Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each.
Refer to Hefner Corporation. What will be the effect on overall corporate profits if the two divisions agree to an internal transfer of 5,000 units?

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The Answer of Hefner Corporation
Hefner Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of the units it can produce (25,000 per year) to external customers for $25 per unit. At this level of activity, X's per unit costs are:
  Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each.
Refer to Hefner Corporation. What will be the effect on overall corporate profits if the two divisions agree to an internal transfer of 5,000 units?

Hefner Corporation Hefner Corporation Is Comprised of Two Divisions: X and Y