Tookey Plc Sold Inventory Items (With a Cost of £75

question 20

Multiple Choice

Tookey Plc sold inventory items (with a cost of £75 000) to its subsidiary Milky Plc for £135 000.A third of the inventory items were sold by Milky Plc to external parties before the financial year end.Ignoring taxes,which of the following statements is correct with respect to this transaction only?

• A)Consolidated sales will decrease by £75 000.
• B)Consolidated sales will decrease by £95 000.
• C)Consolidated profit will decrease by £60 000.
• D)Consolidated profit will decrease by £40 000.

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Definitions:

Product Variety

Refers to the different types and variations of products available in a market or offered by a company.

Excess Capacity

A scenario where a firm’s production capability exceeds the demand for its product, often leading to inefficiency and increased costs.

Product Variation

The process of making slight adjustments to a product's features, design, or offerings to differentiate it from competitors’ products.

Average Total Cost

The total cost of production divided by the number of units produced, representing the average cost per unit.