Diversify Ltd. carry on two substantially different forms of business activity. The accounts sections has been asked to submit a breakdown of sales and profit between the two different classes of business for inclusion in the final published accounts. The information has been drawn up as follows:

Required:

(a) An explanation of the advantages which can accrue to the business from such a breakdown.

(b) An explanation of the problems which may be encountered by a business which seeks to obtain separate figures for the profit or loss accruing from each of its different activities.

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Activity A Activity B Total 1 310 000 Sales Net Profit 750 000 560 000 85 000 74 000 159 000