What is mogi corps operating profit

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Question - Mogi Corp. manufactures one primary product, which is processed through two divisions (P and R). Costs for each division are:

 

P

R

Varioable cost per gallon

$3

$15

Fixed cost per gallon

2

12

P Division produces 25,000 gallons per month. R Division uses 40,000 gallons per month; of that, 25,000 gallons are purchased internally and 15,000 are purchased externally at $10 per gallon. After processing through R Division, a gallon of final product can be sold for $55.

1. What is Mogi Corp.'s operating profit if all 40,000 gallons of product are transferred in a month?

2. By how much would this profit increase if R Division could acquire all necessary gallons internally?

Reference no: EM131700191

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