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C to be transferred to Division B at the marginal cost of $ 1 0 per unit of C and that Division B must buy
to be transferred to Division at the marginal cost of $ per unit of and that Division must buy all the it needs from Division
to units more than the sales volume currently budgeted for next year for Division
Budgeted data, taken from the Freshwave Group, for the divisions for the next year are as follows:
Division S Income Statement $
Sales
Variable cost of sales
Contribution
Fixed Costs controllable
Profit
Other information for Division
ProductionSales units
External demand units
Capacity units
External market price per unit
Capital employed
Cost of capital charge
Division B Income Statement $$
Sales
Variable cost of sales
Contribution
Fixed Costs controllable
Profit
Other information for Division B
ProductionSales units
Capacity units
External market price per unit
Capital employed
Cost of capital charge
of which are transferred to Division B
only of which can be currently satisfied
$
$
$
$
follows:
Proposed Policy
there are concerns about problems that could arise by granting such autonomy.
Part A
measures for each division.
marks
b Measure the performance of the divisions and the Group, which would arise as a result of altering the transfer price to $ per unit.
marks
managers.
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.
marks
b Discuss any nonfinancial factors that may be relevant towards the decision of outsourcing the remote control from Controlclip.
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