Galati Products, Inc., has just purchased a small company that specializes in the manufacture of electronic tuners that are used as a component part of TV sets. Galati Products, Inc., is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells:
- Selling price $20
- Expenses:
- Variable $10
- Fixed (based on a capacity of
- 97,000 tuners per year) 6 16
- Net operating income $4
Galati Products also has an Assembly Division that assembles TV sets. This division is currently purchasing 32,000 tuners per year from an overseas supplier at a cost of $20 per tuner, less a 10% purchase discount. The president of Galati Products is anxious to have the Assembly Division begin purchasing its tuners from the newly acquired Tuner Division in order to "keep the profits within the corporate family."
- How much potential profit will the Tuner Division lose if the $15 price is not met?
- Profit of the company will by $
Refer to (4) above. Assume that due to inflexible management policies, the Assembly Division is required to purchase 32,000 tuners each year from the Tuner Division at $20 per tuner. What will be the effect on the profits of the company as a whole? (Input all amounts as positive values. Omit the "tiny_mce_markerquot; sign in your response.)
a. The Tuner Division will have an in profit by $ .
b. The Assembly Division will have a in profit by $ .
c. The company as a whole will have an in profit by $ .