Division B manufactures and sells reading lamps.
Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,300 lamps for the coming year.
Division B has the capacity to manufacture 48,500 lamps annually. Sales to outside customers are estimated at 36,200 lamps for the next year. Reading lamps are sold at $11 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $103,320.
Consider the following independent situations.
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