Question
A company has two divisions; the Ant Division and the Bee Division. The Ant division supplies the Bee division with the component it requires to
A company has two divisions; the Ant Division and the Bee Division. The Ant division supplies the Bee division with the component it requires to complete its product; The Hive. Bee division sell the Hive for 50 each. There is an external market for the component produced by the Ant division but the Ant division does not sell into this market currently. Both divisions are working at maximum capacity. Budgeted data for the year is: Ant Division Bee Division Units produced and sold 5,000 5,000 Marginal cost per unit 5 20 Annual fixed costs 30,000 50,000 The marginal cost per unit incurred by Bee Division excludes the cost of the component transferred from Ant Division. Calculate the profit earned by each division and in total if division Ant transfers the component to division Bee at marginal cost plus 10%
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