yyy Corporation has a XXX Division that doesn't work for other Divisions in the company and for outside customers. The company's AAA Division has asked the XXX Division to provide it with 4,000 special parts each year. The special parts would require P23.00 per unit in variable production costs. The AAA Division has a bid from an outside supplier for the special parts at P37.00 per unit. In order to have time and space to produce the special part, the XXX Division would have to cut back production of another part-the QW24 that it presently is producing. The QW24 sells for P40.00 per unit, and requires P28.00 per unit in variable production costs. Packaging and shipping costs of the QW24 are P3.00 per unit. Packaging and shipping costs for the new special part would be only P1.50 per unit. The XXX Division is now producing and selling 15,000 units of the QW24 each year. Production and sales of the QW24 would drop by 20% if the new special part is produced for the AAA Division. How much is the increase/(decrease) in the overall profits of the whole company if the transfer takes place?
yyy Corporation has a XXX Division that doesn't work for other Divisions in the company and for outside customers. The company's AAA Division has asked the XXX Division to provide it with 4,000 special parts each year. The special parts would require P23.00 per unit in variable production costs. The AAA Division has a bid from an outside supplier for the special parts at P37.00 per unit. In order to have time and space to produce the special part, the XXX Division would have to cut back production of another part-the QW24 that it presently is producing. The QW24 sells for P40.00 per unit, and requires P28.00 per unit in variable production costs. Packaging and shipping costs of the QW24 are P3.00 per unit. Packaging and shipping costs for the new special part would be only P1.50 per unit. The XXX Division is now producing and selling 15,000 units of the QW24 each year. Production and sales of the QW24 would drop by 20% if the new special part is produced for the AAA Division.
How much is the increase/(decrease) in the overall profits of the whole company if the transfer takes place?
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