The Assembly Division of Scottish Motors Company has offered topurchase 90,000 batteries from the Electrical Division for £104 per unit.At a normal volume of 250,000 batteries per year, production costs perbattery are as follows:Direct materialsDirect manufacturing laborVariable factory overheadFixed factory overheadTotal£ 40201240£112The Electrical Division has been selling 250,000 batteries per year tooutside buyers at £136 each; capacity is 350,000 batteries per year. TheAssembly Division has been buying batteries from outside sources for£130 each.Required:5a. Should the Electrical Division manager accept the offer? Explain.5b. From the company's perspective, will the internal sales be of anybenefit? Explain.

The decision making for the proposal related to whether the Electrical Division should accept the…

Answered: The Assembly Division of Scottish…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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