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please help me answering this question and show me all details as im practicing similar questions for exam. please dont use chatGPT. ABB Sdn Bhd
please help me answering this question and show me all details as im practicing similar questions for exam. please dont use chatGPT.
ABB Sdn Bhd operates two divisions: the Klang Division (KD) and the Ampang Division (AD). AD currently pays KD RM16 per unit for a component of 10,000 units. KD has purchased new equipment and wishes to raise the AD price to RM18 per unit. AD's financial controller claims that the division cannot afford to go that high because it would reduce the division's profit to near zero. AD can obtain the part from a third-party supplier for RM16 per unit. KD's variable costs of RM12 are the incremental costs per unit that ABB Sdn Bhd incurs in producing each unit. With the recent purchase of equipment, KD's fixed costs per unit are RM5. Required: (Show all calculations) a) If ABB Sdn Bhd would prefer to negotiate a transfer price between the divisions, what range of transfer prices would be used? Justify the rationale of your answer. b) If KD could use its facilities for other manufacturing operations, that would result in monthly cash operating savings of RM45,000. What would be the advantage (disadvantage) to ABB Sdn Bhd? Show relevant calculationsStep by Step Solution
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