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

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

Expert Solution

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

jeff jeffy answered 1 year ago

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