Question 2 Borul Concrete Ltd. (BCL) is the largest readymade concrete manufacturer in Australia. It has two independent manufacturing business divisions (profit centres) - Crushed Stones Division (CSD) and Readymade Concrete Division (RCD). CSD produces crushed stones required for readymade concrete. As per the instructions from the BCL headquarter, RCD buys crushed stones internally from CSD, then mixes the crushed stones with cement and other mixers for producing readymade concrete mix and sells the concrete mix to BCL's final concrete customers. RCD buys crushed stones from CSD priced at CSD's variable costs of manufacturing. As CSD and RCD are independent business units of BCL, CSD can sell its crushed stones to outside market and RCD also can buy crushed stones from outside market. The market for crushed stones is perfectly competitive. The performance of the manager of RCD is evaluated based on division's net operating profit. Required: (i) How could the current transfer price create financial results control issues of BCL in evaluating the performance of its managers? Explain. (6 marks). (ii) You are the management accountant of BCL. Advise your superior what transfer price would resolve the transfer price related financial result control problems identified in question (i) above. (4 marks) Edit View Insert Format Tools Table 12pt v Paragraph BIUA &V T V . .. p O words >