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Calculate the profits of the group and imperial

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Reference no: EM132885221

Telex Petroleum Plc is a manufacturing groups. It is operating on divisional structure. Imperial, the group's supplying division, sold barrel of refined petrol to the buying division, Maven. Maven can also buy from external supplier - Lance Petrol Ltd.

  • The Imperial division operating at full capacity producing 10,000 barrels of refine petrol. Out of this, 8,000 barrels were sold to external market at £50 per barrel and 2,000 barrels to Maven division at £40 per barrel. The Variable cost is £25.
  • Maven was approach by Lance Petrol to buy similar refined petrol at a price of £35 per barrel.
  • For the purpose of calculating the internal profit, Imperial allocated the total annual fixed of £80,000 as 70% to external and 30% to Maven.

Required:

Problem a) Calculate the profits of the group and Imperial if Maven division decided to take the Imperial offer and at the same time Imperial sold to the external.

Problem b) Calculate the effect on imperial's contribution and the group profit if Maven accept Lance petrol 's offer.

Reference no: EM132885221

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