Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Moon is a furniture company manufacturing different types of furniture One of its products Double Bed is very popular because of its unique design and

image text in transcribed
Moon is a furniture company manufacturing different types of furniture One of its products Double Bed is very popular because of its unique design and comfort. Company has two divisions Bed Division (B) and Mattress Division(M) Division B produces Bed and Division M produces Mattresses. Both the divisions are profit centers. Division B sells Bed with Mattresses to external customers while Division M sells Mattresses to Division B and to external customers. Division B produces 5,000 Beds every year and External demand for the Beds is also 5,000. The additional data available for both the divisions is as follows: Division B Selling price of Bed+Mattress OMR 300 Cost of Bed Mattress Mattress from Division M - as per the company's policy Other Material Cost OMR 60 Labour Cost OMR 30 Fixed Cost per Year OMR 500,000 Department M Cost of Each Mattress Material Cost OMR 40 Labour Cost OMR 20 Fixed Cost per year OMR 300,000 Number of Mattresses Produced and sold = 15,000 Mattresses External demand for Mattresses is 12,000. Moon Company has set a pricing policy for the mattresses supplied by Division M to Division B at a Marginal cost + 15% to 20%. Division M is bound to sell 5000 mattresses to Division B and remaining to the external supplier for OMR 80 per mattress Required: a) Calculate Transfer price of the mattress supplied by Division M to Division B Under the pricing Policy set by the Moon Company 8 Marks b) Using the appropriate format Prepare a profit statement For Division B. 8 Marks 8 c) Showing the Internal and external sales separately prepare a profit statement For Division M using appropriate format. Marks d) Evaluate both profits from the prospective of division M and Division B and suggest about the Goal congruence Decision Making. 6 Marks

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

Step: 3

blur-text-image

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

The Home Energy Audit Your Guide To Understanding And Reducing Your Home Energy Costs

Authors: Richard Montgomery

1st Edition

0471864668, 978-0471864660

More Books

Students also viewed these Accounting questions