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PLEASE ONLY ANSWER PART A

22. Beeston Limited, producing a range of minerals, is organised into two trading groups: one handles wholesale business and the other sales to retailers. One of its products is moulding clay. The wholesale group extracts the clay and sells it to external wholesale customers as well as to the retail group. The production capacity is 2,000 tonnes per month but at present sales are limited to 80% capacity: 1,000 tonnes wholesale and 600 tonnes retail. The transfer price was agreed at 200 per tonne in line with the external wholesale trade price. The retail group produces 100 bags of refined clay from each tonne of moulding clay which it sells at 4.00 a bag. It would sell a further 400 tonnes, if the retail trade price were reduced to 3.20 a bag. Other data relevant to the operation are: Wholesale group 70 Retail group 60 Variable cost per tonne Fixed cost per month 100,000 40,000 Required a) Prepare estimated profit statement in variable costing format, showing contribution margin, for the month of December for each group and for Beeston Limited as a whole based on transfer prices of 200 per tonne when producing at: i) 80% capacity; and calculate the revised profit for each group and for Beeston Limited as a whole when producing at: ii) trade 100% capacity utilising the extra sales to supply the retail [24 marks] b) Comment on the results achieved under a) [6 marks] [Total 30 marks]