Problem I Cost Decisions SEE ATTACH FILE! The Nicholson and Cage Divisions are in the same company. Currently the Cage Division buys from the Nicholson Division for \$82 per unit. The Nicholson D

Problem I – Cost Decisions SEE ATTACH FILE!

The Nicholson and Cage Divisions are in the same company. Currently the Cage Division buys from the Nicholson Division for \$82 per unit. The Nicholson Division wants to increase the price part to \$94 per unit. Cage Division can buy the part for \$88 from an outside supplier. The cost the part obtained from the Nicholson Division is below:

Direct materials \$25.50

Direct labor 32.50

Variable indirect production 22.50

Fixed indirect production 9.60

If Nicholson does not provide the parts to Cage, it will one-fourth of the fixed cots. The Nicholson Division has excess capacity but no alternative uses of the facility

Required:

From the standpoint of the company as a whole, should Cage Division continue to Nicholson Division? Hint: Determine the avoidable unit cost to make the part in

Please show your work step by step!

ATTACHMENT PREVIEW

Problem I – Cost Decisions
The Nicholson and Cage Divisions are in the same company. Currently the Cage Division
buys from the Nicholson Division for \$82 per unit. The Nicholson Division wants to
increase the price part to \$94 per unit. Cage Division can buy the part for \$88 from an
outside supplier. The cost the part obtained from the Nicholson Division is below:
Direct materials                \$25.50
Direct labor                    32.50
Variable indirect production        22.50
Fixed indirect production           9.60
If Nicholson does not provide the parts to Cage, it will one-fourth of the fixed cots. The
Nicholson Division has excess capacity but no alternative uses of the facility
Required:
From the standpoint of the company as a whole, should Cage Division continue to
Nicholson Division? Hint: Determine the avoidable unit cost to make the part in
Please show your work step by step!