Figure 4 the Simonds Division Produces a Component That Is Used by Used

question 49

Multiple Choice

Figure 4
The Simonds Division produces a component that is used by the Allen Division. The cost of manufacturing the component is as follows:
^aBased on a practical volume of 400,000 components
Other costs incurred by the Simonds Division are as follows:
The component usually sells for £35 in the external market. The Simonds Division is capable of producing 500,000 components per year; however, only 400,000 components are expected to be sold next year. The variable selling expenses are avoidable if the component is sold internally.
The Allen Division has been buying the same component from an external supplier for £34 each. The Allen Division expects to use 50,000 units of the component next year. The manager of the Allen Division has offered to buy 50,000 units from the Simonds Division for £22.50 each.
-Refer to Figure 4. The effect on firmwide income if 50,000 components are transferred internally at £22.50 each instead of purchased from an external supplier at £34 per unit would be a

• A) £700,000 increase
• B) £700,000 decrease
• C) £575,000 increase
• D) £575,000 decrease

---

Definitions:

Public Comment

Public comment is a period offered by governmental bodies during decision-making processes where members of the public can voice their opinions, feedback, or concerns on proposed actions, regulations, or policies.

Environmental Impact Statement

A document outlining the significant effects a proposed project might have on the environment, required in some jurisdictions for major projects.

Irreversible Commitments

Refers to decisions or agreements that cannot be undone or easily reversed.

Premanufacture Screening

The evaluation and testing of a product or substance before it is manufactured or released to the public, to ensure safety and compliance with regulatory standards.