Seprod plc is a manufacturing company where one product Detergent is produced with two major product divisions: Division X and Division Y. The Detergent is produced in Division X, and then transferred to Division Y and also sells externally. AXE Ltd approached Division Y with an offer to supply it with 2500 boxes of Detergent at $25 each. The following details are available for Division X: $ Sales revenue Sales revenue to Division Y @$40 per box 400,000 External sales @$45 per box 270,000 Less: Variable costs @$22 per box (352,000) Fixed Costs (100,000) Profit 218,000 If Division Y decides to buy from AXE Ltd, assuming external sales of Divsion X cannot be increased, what is the impact of the decision on the profits Division X and Seprod plc as a whole?
Seprod plc is a manufacturing company where one product Detergent is produced with two major product divisions: Division X and Division Y. The Detergent is produced in Division X, and then transferred to Division Y and also sells externally. AXE Ltd approached Division Y with an offer to supply it with 2500 boxes of Detergent at $25 each. The following details are available for Division X: $ Sales revenue Sales revenue to Division Y @$40 per box 400,000 External sales @$45 per box 270,000 Less: Variable costs @$22 per box (352,000) Fixed Costs (100,000) Profit 218,000 If Division Y decides to buy from AXE Ltd, assuming external sales of Divsion X cannot be increased, what is the impact of the decision on the profits Division X and Seprod plc as a whole?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Seprod plc is a manufacturing company where one product Detergent is produced with two major product divisions: Division X and Division Y. The Detergent is produced in Division X, and then transferred to Division Y and also sells externally. AXE Ltd approached Division Y with an offer to supply it with 2500 boxes of Detergent at $25 each. The following details are available for Division X:
$
Sales revenue
Sales revenue to Division Y @$40 per box 400,000
External sales @$45 per box 270,000
Less: Variable costs @$22 per box (352,000)
Fixed Costs (100,000)
Profit 218,000
If Division Y decides to buy from AXE Ltd, assuming external sales of Divsion X cannot be increased, what is the impact of the decision on the profits Division X and Seprod plc as a whole?
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