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The National Division of Roboto Company is buying 10,000 widgets from an outside supplier at $30...

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Finance

The National Division of Roboto Company is buying 10,000 widgetsfrom an outside supplier at $30 per unit. Roboto's OverseasDivision, which is producing and selling at full capacity (12,000units), has the following sales and cost structure: Sales price perunit $45.00 Variable cost per unit 22.50 Fixed cost (at capacity)per unit 15.00 If the Overseas Division meets the outsidesupplier's price and sells the 10,000 widgets to National, theeffect on overall company profits will be: A. $75,000 higher B.$150,000 lower C. $225.000 lower D. $300,000 higher

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4.2 Ratings (856 Votes)

If 12000 units sold to outsider
Sale $            45.00
Variable Cost $            22.50
Fixed Cost $            15.00
Profit per unit $               7.50
Units sold 12000
Total Profit $    90,000.00
If 10000 units sold to national & remaining 2000 to outsider
Units sold 10000 2000
Sale $            30.00 $            45.00
Variable Cost $            22.50 $            22.50
Fixed Cost $            15.00 $            15.00
Profit per unit $            (7.50) $              7.50
Units sold 10000 2000
Total Profit $ (75,000.00) $   15,000.00
Total Profit $ (60,000.00)
Profit would reduce by $150000 i.e.b

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Transcribed Image Text

The National Division of Roboto Company is buying 10,000 widgetsfrom an outside supplier at $30 per unit. Roboto's OverseasDivision, which is producing and selling at full capacity (12,000units), has the following sales and cost structure: Sales price perunit $45.00 Variable cost per unit 22.50 Fixed cost (at capacity)per unit 15.00 If the Overseas Division meets the outsidesupplier's price and sells the 10,000 widgets to National, theeffect on overall company profits will be: A. $75,000 higher B.$150,000 lower C. $225.000 lower D. $300,000 higher

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