Answer Happy

Assume a company has two divisions, Division A and Division B.
Division A has provided the following information regarding the one
product that it manufactures and sells on the outside
market:
Division B could use Division A’s product as a component part in
the manufacture of 4,000 units of its own newly-designed product.
Division B has received a quote of $58 from an outside supplier for
a component part that is comparable to the one that Division A
makes.

Also assume that the company’s divisional managers are evaluated
based on their division’s profits and that Division A is currently
selling 20,000 units on the outside market. If the manager of
Division B would not agree to pay Divisions A’s lowest acceptable
transfer price, and instead purchased 4,000 component parts from an
outside supplier, what effect would Division B’s choice have on the
company’s profits?
Multiple Choice
Profits would increase by $12,000
Profits would increase by $8,000
Profits would decrease by $8,000
Profits would decrease by $12,000