39. decrease $50,000 40. increase $80,000 Use the following information to answe
ID: 2494326 • Letter: 3
Question
39. decrease $50,000
40. increase $80,000
Use the following information to answer questions 39 through 40. Seenlt has just purchased a small company that specializes in electronic tuners used as a component in TV sets. Seenlt is a decentralized company. It will treat the newly acquired company as an autonomous division with full profit responsibility The new division, called Tuner Division, has the following revenue and cost associated with each tuner. Selling price per unit on the outside market...................$25 Variable cost per unit. Fixed cost per unit (based on capacity of 80,000 units) Profit per unit...Sl Seenlt also has an Assembly Division that assembles TV sets. This division is currently purchasing 10,000 tuners per year from an overseas supplier at a cost of S20. The president of Seenlt would like Assembly Division to purchase from Tuner Division in order to "keep the profits within the corporate family." 39. Assume Tuner Division is able to sell all the tuners it can make to outside buyers. By what amount would corporate profit change if Tuner were forced to sell 10,000 tuners to Assembly Division at a price of S19? Use the word "increase" or "decrease" to indicate the direction of change.Explanation / Answer
Profit on 10,000 units would be 70,000 if not to sold to assembly division
Profit when sold to assembly division 10,000 ( $1*10,000)
Add cost saving from buying from assembly division ( $20-$19)* 10,000 = 10,000
So total profit of 20,000
70,000 – 20,000 = 50,000 decrease
The tuner divison will earn only $ 1 per units and there would be a cost saving of $1 per unit
40)
Variable cost per unit = $ 12,
Selling price would be $ 19
Profit per unit would be $ 7
For 10,000 units it would be = $ 70,000
Plus there would be a cost saving of $1 if bought from tuner division because market rate is $ 20 and tuner department is selling at $ 19.
So total profit would increase by 80,000 ( 70,000 + 10,000 from cost saving of $1)
No impact of fixed cost as it will remain same
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