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

Gain insight into the reasons and implications of currency valuation policies.

Understand and apply the process of journalizing transactions in various business scenarios.

Identify and correct common errors in journal entries and trial balances.

Prepare trial balances and understand their role in the accounting cycle.

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Definitions:

Elements

In the context of data and statistics, elements refer to the basic entities or components of a dataset.

Variables

Characteristics or quantities that can vary or change within an experiment or among individuals and are measurable.

Number

An object in mathematics utilized for counting, measuring, and labeling purposes.

Rehearsal

The practice of repeatedly going over information or skills to embed them in memory or improve proficiency.