$C$ to be transferred to Division $B$ at the marginal cost of $$10$ per unit of $C$ and that Division $B$ must buy all the $C$ it needs from Division $S.$

to $1,000$ units more than the sales volume currently budgeted for next year for Division $S.$

Budgeted data, taken from the Freshwave Group, for the divisions for the next year are as follows:

Division S$\text{'}$ Income Statement $($$$)$

Sales

Variable cost of sales

Contribution

Fixed Costs $($controllable$)$

Profit

Other information for Division $S$

Production$/$Sales $($units$)$

External demand $($units$)$

Capacity $($units$)$

External market price per unit

Capital employed

Cost of capital charge

Division B$\text{'}$ Income Statement $($$$$)$

Sales

Variable cost of sales

Contribution

Fixed Costs $($controllable$)$

Profit

Other information for Division B

Production$/$Sales $($units$)$

Capacity $($units$)$

External market price per unit

Capital employed

Cost of capital charge

of which are transferred to Division B$)$

$3,000($only $2,000$ of which can be currently satisfied$)$

$5,000$

$$20$

$$60,000$

$10\%$

$270,000$

$114,{000}_{?}$

$156,000$

$100,{000}_{?}$

$56,{000}_{?}$

$3,000$

$7,000$

$$90$

$$110,000$

$10\%$

follows:

Proposed Policy

there are concerns about problems that could arise by granting such autonomy.

Part A

measures for each division.

$(16$ marks$)$

$($b$)$ Measure the performance of the divisions and the Group, which would arise as a result of altering the transfer price to $$20$ per unit.

$(7$ marks$)$

managers.

$(6$ marks$)$

$)$

located in Country Z$,$ a developing country.

and $($ii$)$ Division S to sell externally at any quantity; provided that the divisions work together to optimize the profits of Freshwave as a whole.

Required:

could be acceptable to both divisions. Support your proposal with profit computations of the divisions and the group.

$(12$ marks$)$

$($b$)$ Discuss any non$-$financial factors that may be relevant towards the decision of outsourcing the remote control from Controlclip.