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assume alpha division offers to sell 315,000 units to beta division for $118 per unit and that beta division refuses this price. what will be the loss in potential profits for the company as a whole?

User Gjrwebber
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Answer:

To calculate the potential loss in profits for the company as a whole, we need to know the profit margin or the difference between the cost of production and the selling price of the units. Without that information, we cannot determine the exact loss in potential profits. However, we can provide a general framework for understanding the potential loss.

Let's assume that the cost of production per unit for Alpha division is $100. If Beta division refuses to purchase the units at $118 per unit, it indicates that the selling price is above their willingness to pay.

To calculate the potential loss, we need to determine the alternative selling price that Beta division would be willing to accept. Let's say Beta division is willing to purchase the units at $110 per unit.

The loss in potential profit per unit would then be $118 - $110 = $8 per unit.

To calculate the total loss in potential profits for the company as a whole, we multiply the loss per unit by the number of units that Beta division refused to purchase:

Loss in potential profits = Loss per unit x Number of units refused

Loss in potential profits = $8/unit x 315,000 units

Please note that this calculation assumes a simplified scenario and does not take into account other factors such as variable costs, fixed costs, and other potential customers or markets.

User Camil
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