SCENARIO 1 Kemper Corporations operates offices and facilities across the state. To assist employees who must visit different locations Kemper has 20 vehicles available staff to use as part of the Vehicle Department. This department is responsible for all expenses, maintenance, and repairs of the vehicles. There is an administrative coordinator who manages the department including vehicles booking, replacement and maintenance schedules as well as the budget. One mechanic is on staff to do the regular maintenance and minor reports. If major repairs are needed, they are performed by a local automotive repair shop. During the month one additional vehicle was purchased The administrative coordinator is not happy with the cost control report because it shows a deficit. The following cost control report for April of the current year compared to the planning budget for April. Kemper Corporation - Vehicle Department Cost Control Report For April 30, 2022 Variance Kilometers Vehicles Planning Budget 50,000 20 Actual 63,000 21 Salaries and benefits $7,540 $7,540 $0 Petrol Parts and fluids External repairs Insurance Vehicle depreciation 7,500 2,000 1,500 2,000 5,000 9,350 2,360 1,420 2,120 5,250 (1,850) (360) 80 (120) 1250 Total $25,540 $28,040 ($2,500 The planning budget was based on the following assumptions: a. Salaries and benefits $7,540 per month for salaries and benefit b. Petrol $0.15 per kilometer c. Parts and fluids $0.04 per kilometer d. External repairs $75 per vehicle per month e. Insurance $100 per vehicle per month f. Vehicle depreciation $250 per vehicle per month SCENARIO 2 Kemper corporation manufactures and retails watches. It has three departments: Component, Movement, Toorn. The general managers of the departments have the authority to decide whether are not to sell outside of the company or within. The Transfer prices are determined by the managers of cach department. There is external demand for each department's products and there is an external supply to purchase from. Demand for the products each department produces is such that whether the sales are make internally or externally the market and transfer prices are not impacted. The manager of the Movement department is deciding between two orders. 1. The Toorn department needs 3,000 units from the Movement department. To manufacture the units, Movement needs to purchase parts from the Component department priced at $600 per unit. The Component department's variable cost for the parts is $300 per unit. It will cost the Movement department $500 per unit for further processing before shipping to Toorn The manager knows that if Toorn cannot buy the parts internally from Movement they will purchase the parts from the Vander Corporation for a price of $1,500 per unit. Vander would need to purchase 3,000 parts from Components for $400 each. The variable cost of these parts is $200 each. 2. The Aloe Company wants place an order with the Movement department for 3,500 unit at a price of $1,250 per unit. Movement would have to purchase components from the Component department for $500 per unit. The Components variable cost for these units are $250 each. $400 per unit of work would have to be done by the Movement department to get them ready to sell to Aloe Company. The Movement department's plant capacity is limited and the departmen can either accept the Aloe contract or the Toorn department order, but not both. Capacity can not be increased in the short-term. SCENARIO 1 Kemper Corporations operates offices and facilities across the state. To assist employees who must visit different locations Kemper has 20 vehicles available staff to use as part of the Vehicle Department. This department is responsible for all expenses, maintenance, and repairs of the vehicles. There is an administrative coordinator who manages the department including vehicles booking, replacement and maintenance schedules as well as the budget. One mechanic is on staff to do the regular maintenance and minor reports. If major repairs are needed, they are performed by a local automotive repair shop. During the month one additional vehicle was purchased The administrative coordinator is not happy with the cost control report because it shows a deficit. The following cost control report for April of the current year compared to the planning budget for April. Kemper Corporation - Vehicle Department Cost Control Report For April 30, 2022 Variance Kilometers Vehicles Planning Budget 50,000 20 Actual 63,000 21 Salaries and benefits $7,540 $7,540 $0 Petrol Parts and fluids External repairs Insurance Vehicle depreciation 7,500 2,000 1,500 2,000 5,000 9,350 2,360 1,420 2,120 5,250 (1,850) (360) 80 (120) 1250 Total $25,540 $28,040 ($2,500 The planning budget was based on the following assumptions: a. Salaries and benefits $7,540 per month for salaries and benefit b. Petrol $0.15 per kilometer c. Parts and fluids $0.04 per kilometer d. External repairs $75 per vehicle per month e. Insurance $100 per vehicle per month f. Vehicle depreciation $250 per vehicle per month SCENARIO 2 Kemper corporation manufactures and retails watches. It has three departments: Component, Movement, Toorn. The general managers of the departments have the authority to decide whether are not to sell outside of the company or within. The Transfer prices are determined by the managers of cach department. There is external demand for each department's products and there is an external supply to purchase from. Demand for the products each department produces is such that whether the sales are make internally or externally the market and transfer prices are not impacted. The manager of the Movement department is deciding between two orders. 1. The Toorn department needs 3,000 units from the Movement department. To manufacture the units, Movement needs to purchase parts from the Component department priced at $600 per unit. The Component department's variable cost for the parts is $300 per unit. It will cost the Movement department $500 per unit for further processing before shipping to Toorn The manager knows that if Toorn cannot buy the parts internally from Movement they will purchase the parts from the Vander Corporation for a price of $1,500 per unit. Vander would need to purchase 3,000 parts from Components for $400 each. The variable cost of these parts is $200 each. 2. The Aloe Company wants place an order with the Movement department for 3,500 unit at a price of $1,250 per unit. Movement would have to purchase components from the Component department for $500 per unit. The Components variable cost for these units are $250 each. $400 per unit of work would have to be done by the Movement department to get them ready to sell to Aloe Company. The Movement department's plant capacity is limited and the departmen can either accept the Aloe contract or the Toorn department order, but not both. Capacity can not be increased in the short-term