Pong (Pty) Ltd manufactures and sells a wide range of products. The products are manufactured by various divisions and sold in a number of separate markets. The following financial information is provided for the year ended 30 June 2023:

  

Sales Cost of Sales Gross Profit Other expenses Net profit An offer has been received to purchases Division R which has been performing poorly over the past few years. The following information relates to Division R: R 10 750 000 (8 062 500) 2 687 500 (825 000) 1 862 500 Gross Profit % on sales is 60% of that earned by the group. Total sales amount to 15% of group sales. Manufacturing fixed overhead of R275 000 are included in cost of sales.