Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

DoubleAA Manufacturing Sdn Bhd is a locally incorporated resident company carrying on the business of manufacturing and selling components for electrical products. The Supply Division

image text in transcribedimage text in transcribed
DoubleAA Manufacturing Sdn Bhd is a locally incorporated resident company carrying on the business of manufacturing and selling components for electrical products. The Supply Division makes these components that can be either be sold to external customers or transferred internally to Assembly Division, which uses the component in its final product. The annual data relating to this component are as follows: Annual production capacity 40,000 units Selling price of the item to outside customers RM30 Variable cost per unit Direct materials RM5.00 Direct labour RM4.00 Variable overhead RM3.00 Variable selling RM1.50 Fixed cost per unit RM4.50 The variable selling expenses are avoidable if the part is sold internally. Assembly Division requires 25,000 units per year and is currently paying outside supplier RM26 per unit. Required: (Show all calculations] (a) If Supply Division has an external demand of 15,000 units, what is the minimum transfer price that Supply Division can offer to Assembly Division? Explain the rationale for your answer. (b) If Supply Division has an external demand of 40,000 units, what is the minimum transfer price that Supply Division can offer to Assembly Division? Should Assembly Division accept the price offered by Supply Division? Explain the rationale for your answer.(c) If Supply Division has an external demand of 20,000 units, what is the lowest transfer price acceptable by the Assembly Division? Explain the rationale for your

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Comprehensive Assurance & Systems Tool

Authors: Laura IngrahamJ Jenkins

2nd Edition

0131377213, 9780131377219

More Books

Students also viewed these Accounting questions