manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at P700 a unit. The Engine Division, currently operating at capacity, has a unit sales price of P1,700 and unit variable costs and fixed costs of P700 and P500, respectively. The Production Division is currently paying P1,600 per unit to an outside supplier. P60 per unit can be saved on internal sales from reduced selling expenses. What is the increase/(decrease) in overall company profits if this transfer takes place?
manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at P700 a unit. The Engine Division, currently operating at capacity, has a unit sales price of P1,700 and unit variable costs and fixed costs of P700 and P500, respectively. The Production Division is currently paying P1,600 per unit to an outside supplier. P60 per unit can be saved on internal sales from reduced selling expenses.
What is the increase/(decrease) in overall company profits if this transfer takes place?
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