General

I only have the current edition of the BPP Revision Kit and I cannot find anywhere in it the question as you have typed it. Without seeing the question and answer I cannot explain.

Sir below is the question: Division X and Division Y are profit centres in the same company. Division X makes a single component product. It has a fixed contract to supply an external customer with 5,000 units each month at a price of $35 per unit. All other sales are to Division Y at $30 per unit. Budgeted monthly profits for Division X are as follows: $ Sales: External 350,000 Sales to Division Y 150,000 500,000 Variable costs (270,000) Fixed costs (170,000 Profit 60,000 An external supplier offers to sell 4,000 units of the component to Division Y at a price of $25 per unit, for one month only. Division X would not be able to sell additional components externally.

Again, this question is not in the current edition of the BPP Revision Kit and so I cannot check that you have copied the wording correctly and I cannot see what the question actually asked for. The question as you have typed it does not say that they only sell 5,000 externally. They have a fixed contract to sell 5,000 to one customer, but that does not mean that they do not sell more to others - they obviously sell more to others as you can see from the external revenue figure!! It is also clear from the revenue from division Y in the question that they are currently selling 5,000 units to division Y.

Yeah that could be possible.. Got it.. Thank you sir !

You are welcome.