Veritron Division of Argos Inc.has a capacity of 100,000 units and expects the following results for the year.$$\begin{array} { | l | r | }
\hline \text { Sales } ( 90,000 \text { units at } \$ 30 ) & \$ 2,700,000 \
\hline \text { Variable costs, at } \$ 20 & 1,800,000 \
\hline \text { Fixed costs } &\underline{ 700,000} \
\hline \text { Income } & \$ 200,000 \
\hline
\end{array}$$ Magnatron Division of Argos Inc.currently purchases 20,000 units of a part for one of its products from an outside supplier at $32 per unit.Magnatron's manager believes she could use a minor variation of Veritron's product instead,and offers to buy the units from Veritron at $26.Making the variation desired by Magnatron would cost Veritron an additional $5 per unit and would increase Veritron's annual cash fixed costs by $80,000.Veritron's manager agrees to the deal offered by Magnatron's manager.Required:
a.Find the effect of the deal on Magnatron's income.b.Find the effect of the deal on Veritron's income.c.Find the effect of the deal on the income of Argos Inc.as a whole.

Question

Veritron Division of Argos Inc.has a capacity of 100,000 units and expects the following results for the year.$$\begin{array} { | l | r | } 
\hline \text { Sales } ( 90,000 \text { units at } \$ 30 ) & \$ 2,700,000 \
\hline \text { Variable costs, at } \$ 20 & 1,800,000 \
\hline \text { Fixed costs } &\underline{ 700,000} \
\hline \text { Income } & \$ 200,000 \
\hline
\end{array}$$ Magnatron Division of Argos Inc.currently purchases 20,000 units of a part for one of its products from an outside supplier at $32 per unit.Magnatron's manager believes she could use a minor variation of Veritron's product instead,and offers to buy the units from Veritron at $26.Making the variation desired by Magnatron would cost Veritron an additional $5 per unit and would increase Veritron's annual cash fixed costs by $80,000.Veritron's manager agrees to the deal offered by Magnatron's manager.Required:
a.Find the effect of the deal on Magnatron's income.b.Find the effect of the deal on Veritron's income.c.Find the effect of the deal on the income of Argos Inc.as a whole.

Quizplus · Accepted Answer

The Answer of Veritron Division of Argos Inc.has a capacity of 100,000 units and expects the following results for the year.$$\begin{array} { | l | r | } 
\hline \text { Sales } ( 90,000 \text { units at } \$ 30 ) & \$ 2,700,000 \
\hline \text { Variable costs, at } \$ 20 & 1,800,000 \
\hline \text { Fixed costs } &\underline{ 700,000} \
\hline \text { Income } & \$ 200,000 \
\hline
\end{array}$$ Magnatron Division of Argos Inc.currently purchases 20,000 units of a part for one of its products from an outside supplier at $32 per unit.Magnatron's manager believes she could use a minor variation of Veritron's product instead,and offers to buy the units from Veritron at $26.Making the variation desired by Magnatron would cost Veritron an additional $5 per unit and would increase Veritron's annual cash fixed costs by $80,000.Veritron's manager agrees to the deal offered by Magnatron's manager.Required:
a.Find the effect of the deal on Magnatron's income.b.Find the effect of the deal on Veritron's income.c.Find the effect of the deal on the income of Argos Inc.as a whole.

Veritron Division of Argos Inc Magnatron Division of Argos Inc