MAC3761 October 2024 Exam paper
a) Internal transfer price per dish set
The company is using absorption costing
Variable direct costs + Fixed manufacturing costs
Round steel (40*4.5) 180
LNB 144
Mounting bracket 62
Labour hours (150/60*30) 75
FMO (6600 000/440 000) 15
476
FMO Total budgeted fixed cost
Budgeted Units
Total labour hours 1 100 000
One dish set (150/60) 2,5
Number (1100 000/2,5) 440000
b) Minimum transfer price
This is the minimum price the selling division is willing to accept.
Minimum transfer price = incremental costs + opportunity costs
Opportunity
Maximum capacity XXX
Less required external market (XXX)
excess XXX
Less required by internal market (XXX)
shortfall (opportunity cost XXX
Opportunity cost
Academic needs contact /0651609781
, (External selling price-Variable cost to sale to external market) *units short fall.
Total units sold to internal division
The current price is less than the minimum transfer price.
Variable cost (180+144+62+75) 461
Opportunity cost
Maximum capacity (1100 000/2,5) 440 000
External demand -144 000
296 000
Required by internal division -336 000
Shortfall (336000-296000) -40 000
Selling price external market 510
less variable cost -461
Less selling cost -27,5
21,5
Opportunity cost (21,50*40 000)/336 000 2,56
Minimum transfer price (2,56+461) 463,56
The minimum transfer price of R463,56 is less than the current budgeted transfer
price of R476.
I do not agree with the manager's point that if the minimum transfer price were
used, they would be paying less.
c) Target number of Units
Fixed Cost + Target Profit
Weighted Contribution
Contribution (Selling price-variable cost) DF Tv Openwatch
Selling Price 1550 1420
Variable cost
Dish set Cost -470 -470
Other variable manufacturing cost -867 -787
Selling Cost -7 -7
Direct labour Cost (30*1,4); (30*0,9) -42 -27
Contribution per unit 164 129
Academic needs contact /0651609781
a) Internal transfer price per dish set
The company is using absorption costing
Variable direct costs + Fixed manufacturing costs
Round steel (40*4.5) 180
LNB 144
Mounting bracket 62
Labour hours (150/60*30) 75
FMO (6600 000/440 000) 15
476
FMO Total budgeted fixed cost
Budgeted Units
Total labour hours 1 100 000
One dish set (150/60) 2,5
Number (1100 000/2,5) 440000
b) Minimum transfer price
This is the minimum price the selling division is willing to accept.
Minimum transfer price = incremental costs + opportunity costs
Opportunity
Maximum capacity XXX
Less required external market (XXX)
excess XXX
Less required by internal market (XXX)
shortfall (opportunity cost XXX
Opportunity cost
Academic needs contact /0651609781
, (External selling price-Variable cost to sale to external market) *units short fall.
Total units sold to internal division
The current price is less than the minimum transfer price.
Variable cost (180+144+62+75) 461
Opportunity cost
Maximum capacity (1100 000/2,5) 440 000
External demand -144 000
296 000
Required by internal division -336 000
Shortfall (336000-296000) -40 000
Selling price external market 510
less variable cost -461
Less selling cost -27,5
21,5
Opportunity cost (21,50*40 000)/336 000 2,56
Minimum transfer price (2,56+461) 463,56
The minimum transfer price of R463,56 is less than the current budgeted transfer
price of R476.
I do not agree with the manager's point that if the minimum transfer price were
used, they would be paying less.
c) Target number of Units
Fixed Cost + Target Profit
Weighted Contribution
Contribution (Selling price-variable cost) DF Tv Openwatch
Selling Price 1550 1420
Variable cost
Dish set Cost -470 -470
Other variable manufacturing cost -867 -787
Selling Cost -7 -7
Direct labour Cost (30*1,4); (30*0,9) -42 -27
Contribution per unit 164 129
Academic needs contact /0651609781
