The Tire Division of Traker Company Produces Tires for Off-Road

Multiple Choice

The Tire Division of Traker Company produces tires for off-road sport vehicles.One-third of Tire's output is sold to an internal division of Traker;the remainder is sold to outside customers.Tire's estimated operating profit for the year is:
$$\begin{array} { | l | r | r | } \hline & \text { Intemal } & \text { Outside } \\\hline \text { Sales } & \$ 150,000 & \$ 400,000 \\\hline \text { Variable costs } & 100,000 & 200,000 \\\hline \text { Fixed costs } & 30,000 & 60,000 \\\hline \text { Operating profits } & \$ 20,000 & \$ 140,000 \\\hline \text { Unit sales } & 10,000 & 20,000 \\\hline\end{array}$$
The internal division has an opportunity to purchase 10,000 tires of the same quality from an outside supplier on a continuing basis.The Tire Division cannot sell any additional products to outside customers.Should the Traker Company allow its internal division to purchase the tires from the outside supplier at $13.00 per unit?

A) No;making the tires will save Traker $15,000.
B) Yes;buying the tires will save Traker $15,000.
C) No;making the tires will save Traker $30,000.
D) Yes;buying the tires will save Traker $30,000.