74. Computer Solutions Corporation manufactures and sells various high-tech office automation
products. Two divisions of Computer Solutions Corporation are the Computer Chip Division
and the Computer Division. The Computer Chip Division manufactures one product, a "super
chip," that can be used by both the Computer Division and other external customers. The
following information is available on this month's operations in the Computer Chip Division:
Selling price per chip P50
Variable costs per chip P20
Fixed production costs P60,000
Fixed SG&A costs P90,000
Monthly capacity 10,000 chips
External sales 6,000 chips
Internal sales 0 chips
Presently, the Computer Division purchases no chips from the Computer Chips Division, but
instead pays P45 to an external supplier for the 4,000 chips it needs each month.
Assume, for this question only, that the Computer Chip Division is selling all that it can
produce to external buyers for P50 per unit. How would overall corporate profits be affected
if it sells 4,000 units to the Computer Division at P45? (Assume that the Computer Division
can purchase the super chip from an outside supplier for P45.)
a. no effect c. P20,000 decrease
b. P20,000 increase d. P90,000 increase
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