QUESTION 3 PART A Leisure Group Berhad has a number of divisions including a Hotel division and a Furniture division. The Hotel Division operates a number of budget hotels along the east coast states of Terengganu and Pahang. Each year, the Hotel division purchases furniture for its hotel rooms. Currently, it purchases a bed-side table from outside suppliers for RM42.00. The manager of the Furniture division has approached the manager of the Hotel division about selling bed-side tables to the Hotel Division. The manager of the Furniture Division has tabulated the cost of one unit of bed-side table as follows:

RM Direct materials 8.00 Direct labour 4.00 Variable Overhead 3.00 Fixed overhead 12.00 Total manufacturing cost 27.00