The CD Division of Sound Company Makes and Sells Compact

question 29

Multiple Choice

The CD Division of Sound Company makes and sells compact disk players (CDP) that can be sold it presently sells to outside customers. Budgeted costs next month for the CD Division are as follows: $\begin{array}{lrr} \text {Sales of CDPs to outside customers. } & \text { 2,800 units} \\ \text { Selling price per CDP to outside customers. } &£ 185\\ \text {Unit variable production costs. } &£ 120\\\end{array}$

MaxiSound, another division of Sound Company, would like to buy 1,000 of the CDPs from the CD Division. An outside supplier has offered to sell similar CDPs to MaxiSound for £170 each.
- Assume that CD Division's monthly production capacity is 3,200 units and the MaxiSound Division will acquire the CDPs from the outside supplier if they are not available from the CD Division. If the CD Division sells 1,000 CDPs to MaxiSound for £170 each, the effect on the monthly profits of Sound Company as a whole will be a

• A)£9,000 decrease.
• B)£74,000 decrease.
• C)£20,000 increase.
• D)£11,000 increase.

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Definitions:

Less Developed Countries

Nations with low levels of economic resources, industrialization, and Human Development Index ratings compared to other countries.

Economic Development

The progress in economic and social well-being including higher income, improved standards of living, and reduction of poverty.

Military Spending

Government expenditure on the military and defense sector, including salaries, hardware, operations, and maintenance.

Industrial Revolution

A period of major industrialization that took place during the late 1700s and early 1800s, leading to significant advancements in technology, manufacturing, and transportation.