QUESTION $3$

$[20$ MARK$8]$

Mabusi Inc. consist of two divisions, Division A and Division B$.$ Division A is operating at $60\%$ capacity, while Division B is operating at full capacity $(7000$ hours$)$

Division B produces two products, Wiki and Tiki. Both products use the same labourers. They are planning to produce $3000kg$ Tiki with the remaining eapacity applied to Wiki for the coming year. Direct costs are as follows:

$\backslash$table$[[,$Wiki $(N$$ per $Kg,$Tiki $($N$$ per $Kg)],[$Material$,20,14],[$Labour$,18(1$ hour$),12(40$ minules$)]]$

Overheads amount to $N$$$154,000$ per annum and are alloeated on labour hours. At full capacity, $N$$$84,000$ of the overheads are variable. Division B determines selling price by adding $50\%$ to total cost. During the coming year, Division A wants $10$ convert $2,600kg$ Wilk to obtain a product called Smoots. Smoots sells at $N$$$150$ per $kg.$

Conversion costs for Smoots amount to $N$$$20$ per $kg.$ Division A$\text{'}$s flxed cesis will remain unchanged, while the variable overhead costs will increase with No$1,50$ per kg$.$ If Bivision B transfers products to Division A$,$ packaging costs of $N$$$5$ will be saved.

$\backslash$table$[[$REQUIRED:$,$MARKE$],[$Advise the company if the transfer of $2,500kg$ Wiki from Division B to Division A$,20],[$for further conversion should take place.,$]]$