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During the current financial year JAVA plc has undergone significant organisational changes: amongst other things, the company has adopted a divisional organisational structure and is
During the current financial year JAVA plc has undergone significant organisational changes: amongst other things, the company has adopted a divisional organisational structure and is now composed of two divisions or business segments, Division A and Division B Budget information It is planned that there will be transfers of components from Division A to Division B during the next financial year and, in line with a newlyadopted transfer pricing system, transfers will be made at total cost. Budgets for the next financial year are: Division A Division B J plc Own Production Costs: Note Variable costs Fixed costs Total cost Note : these costs exclude the impact of transfers between divisions. Division A is budgeted to produce units of Component A selling units to external customers at per unit and transferring units to Division B Division B is budgeted to take units from Division A and put them through its own production process before selling all units as Product B to external customers at per unit. Additional information Both Divisions A and B are budgeted to operate at of capacity during the next financial year. However Division B has received an offer from a new customer, M plc who wishes to buy units of Product B during the next financial year at a price of per unit; this offer meets all legal requirements and would not affect the budgeted business of either Division A or Division B It is expected that M plc would buy at least units of Product B each year for the next years, although a guaranteed contract is not envisaged. Further information It is expected that, in the near future, JAVA plc will adopt management systems whereby decisionmaking will be largely decentralised at divisional level, except for matters relating to corporate strategy. Furthermore a system of responsibility accounting will be employed. Under this system, the general managers of Division A and Division B will each be held accountable for the financial performance of their own division and will be eligible for significant bonuses related to this financial performance. Within each division, the sales and marketing function will be regarded as a revenue centre, the production function as a cost centre and the administration and research functions as managed cost centres. Required: a as far as is possible from the information given, prepare budgets for the next financial year for Division A Division B and JAVA plc b present financial analysis of M plcs offer, viewed from the perspective of: the general manager of Division B the chief executive of JAVA plc and analyse reasons for and against acceptance of this offer. c explain the concept of responsibility accounting and analyse how it may employed in JAVA plc I want full answers and not step by step instructions and the given solution was incomplete
During the current financial year JAVA plc has undergone significant organisational changes: amongst other things, the company has adopted a divisional organisational structure and is now composed of two divisions or business segments, Division A and Division B
Budget information
It is planned that there will be transfers of components from Division A to Division B during the next financial year and, in line with a newlyadopted transfer pricing system, transfers will be made at total cost. Budgets for the next financial year are:
Division A Division B J plc
Own Production Costs: Note
Variable costs
Fixed costs
Total cost
Note : these costs exclude the impact of transfers between divisions.
Division A is budgeted to produce units of Component A selling units to external customers at per unit and transferring units to Division B
Division B is budgeted to take units from Division A and put them through its own production process before selling all units as Product B to external customers at per unit.
Additional information
Both Divisions A and B are budgeted to operate at of capacity during the next financial year. However Division B has received an offer from a new customer, M plc who wishes to buy units of Product B during the next financial year at a price of per unit; this offer meets all legal requirements and would not affect the budgeted business of either Division A or Division B It is expected that M plc would buy at least units of Product B each year for the next years, although a guaranteed contract is not envisaged.
Further information
It is expected that, in the near future, JAVA plc will adopt management systems whereby decisionmaking will be largely decentralised at divisional level, except for matters relating to corporate strategy. Furthermore a system of responsibility accounting will be employed. Under this system, the general managers of Division A and Division B will each be held accountable for the financial performance of their own division and will be eligible for significant bonuses related to this financial performance. Within each division, the sales and marketing function will be regarded as a revenue centre, the production function as a cost centre and the administration and research functions as managed cost centres.
Required:
a as far as is possible from the information given, prepare budgets for the next financial year for Division A Division
B and JAVA plc
b present financial analysis of M plcs offer, viewed from the perspective of:
the general manager of Division B
the chief executive of JAVA plc
and analyse reasons for and against acceptance of this offer.
c explain the concept of responsibility accounting and analyse how it may employed in JAVA plc I want full answers and not step by step instructions and the given solution was incomplete
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