Fixed overhead is absorbed at a rate of RM20 per labour hour. The remaining overhead is...

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Fixed overhead is absorbed at a rate of RM20 per labour hour. The remaining overhead is variable. The division is operating at 80% annual capacity. It has a maximum of 25,000 labour hours per annum. 60% of the PD's output is sold internally to the AD at market price. The remaining output is sold exterally at a market price of RM60 per motor. Without internal sales, PD is expected to double its external sales at the current market price. Upon receiving motors from PD, AD will further incur the following costs before selling the completed motors to the external market at RM120 per unit: Materials Labour Variable overheads Selling cost RM 8.00 5.00 3.00 2.50 The above costs are calculated based on a required production volume of 30,000 units. AD buys the remaining units from an external supplier at RM40 per motor before incurring the further cost. For the coming year 2022, PD plans to work at maximum capacity to achieve the target set by the central management if proposed transfer price of RM32 is used. PD is proposing to transfer the remaining units to AD after maximising its external sales. The company's central management is concerned about the financial implications of this proposal. Required: Prepare the profit statement for each division and the company for the year 2022 if the market price is used as the transfer price. (a) (11 marks) (b) Prepare the profit statement for each division and the company overall for the year 2022 if transfer price of RM32 is used. (9 marks) (c) Explain the profit difference between part (a) and part (b) above. (4 marks) (d) Based on part (c) above, advise Yum Yum Bhd. on whether PD's proposal to work at maximum capacity should be accepted. (1 mark) Yum Yum Bhd. (YYB) manufactures a commercial bread maker for use in local restaurants and hotels. It has been successful over the last ten years due to strong support from business customers and the durable quality of its products. YYB has two divisions namely Production Division (PD) and Assembly Division (AD). PD manufactures motors for the bread maker at the following standard costs per unit for the year 2021: Materials Labour (RM24 per hour) RM 20.00 12.00 15,00 Selling cost (external sales only) 4.00 Overheads Fixed overhead is absorbed at a rate of RM20 per labour hour. The remaining overhead is variable. The division is operating at 80% annual capacity. It has a maximum of 25,000 labour hours per annum. 60% of the PD's output is sold internally to the AD at market price. The remaining output is sold exterally at a market price of RM60 per motor. Without internal sales, PD is expected to double its external sales at the current market price. Upon receiving motors from PD, AD will further incur the following costs before selling the completed motors to the external market at RM120 per unit: Materials Labour Variable overheads Selling cost RM 8.00 5.00 3.00 2.50 The above costs are calculated based on a required production volume of 30,000 units. AD buys the remaining units from an external supplier at RM40 per motor before incurring the further cost. For the coming year 2022, PD plans to work at maximum capacity to achieve the target set by the central management if proposed transfer price of RM32 is used. PD is proposing to transfer the remaining units to AD after maximising its external sales. The company's central management is concerned about the financial implications of this proposal. Required: Prepare the profit statement for each division and the company for the year 2022 if the market price is used as the transfer price. (a) (11 marks) (b) Prepare the profit statement for each division and the company overall for the year 2022 if transfer price of RM32 is used. (9 marks) (c) Explain the profit difference between part (a) and part (b) above. (4 marks) (d) Based on part (c) above, advise Yum Yum Bhd. on whether PD's proposal to work at maximum capacity should be accepted. (1 mark) Yum Yum Bhd. (YYB) manufactures a commercial bread maker for use in local restaurants and hotels. It has been successful over the last ten years due to strong support from business customers and the durable quality of its products. YYB has two divisions namely Production Division (PD) and Assembly Division (AD). PD manufactures motors for the bread maker at the following standard costs per unit for the year 2021: Materials Labour (RM24 per hour) RM 20.00 12.00 15,00 Selling cost (external sales only) 4.00 Overheads

Answer rating: 100% (QA)

a Profit Statement for each division and the company for the year 2022 if the market price is used as the transfer price PD Division External Sales Re... View the full answer