The CD Division of Sound Company makes and sells compact disk players (CDP) that can be sold it presently sells to outside customers. Budgeted costs next month for the CD Division are as follows:$\begin{array}{lrr}
\text {Sales of CDPs to outside customers. } & \text { 2,800 units} \
\text { Selling price per CDP to outside customers. } &£ 185\
\text {Unit variable production costs. } &£ 120\
\end{array}$

MaxiSound, another division of Sound Company, would like to buy 1,000 of the CDPs from the CD Division. An outside supplier has offered to sell similar CDPs to MaxiSound for £170 each.
-Assume the CD Division's monthly production capacity is 4,000 units. If the CD Division sells 1,000 CDPs to MaxiSound for £170 each, the monthly effect on the profits of CD Division will be a

Question

The CD Division of Sound Company makes and sells compact disk players (CDP) that can be sold it presently sells to outside customers. Budgeted costs next month for the CD Division are as follows:$\begin{array}{lrr}
  \text {Sales of CDPs to outside customers.  } & \text {  2,800 units} \
 \text { Selling price per CDP to outside customers. } &£ 185\
 \text {Unit  variable production costs.  } &£ 120\
\end{array}$

MaxiSound, another division of Sound Company, would like to buy 1,000 of the CDPs from the CD Division. An outside supplier has offered to sell similar CDPs to MaxiSound for £170 each.
-Assume the CD Division's monthly production capacity is 4,000 units. If the CD Division sells 1,000 CDPs to MaxiSound for £170 each, the monthly effect on the profits of CD Division will be a

Quizplus · Accepted Answer

The profit per unit for the CD Division when selling to outside customers is £185 - £120 = £65. If the CD Division sells 1,000 CDPs to MaxiSound for £170 each, the variable cost remains £120, leading to a profit of £170 - £120 = £50 per unit. Selling 1,000 units at this profit level results in a £50,000 increase (£50 * 1,000).

The CD Division of Sound Company Makes and Sells Compact