Name of InstructorName of StudentCourse CodeCourse TitleDate of Submissiona.Transfer price = absorption cost plus a 20% mark-up for the selling divisionNorth Division:Original BudgetQuantityVariable CostTotalInternalX3,0001,2003,600,000ExternalX1000900900,000Total4,500,000Revised BudgetInternalX2,0001,2002,400,000ExternalX2,0009001,800,000Total4200,000 Original Budget Revised Budget = 3,900,000 3,800,000 = 300,000 increase in profitSouth Division:Original BudgetQuantityVariable CostTotalInternalY1,0002,4002,400,000ExternalY1,0001,9001,900,000Total4300,000Revised BudgetInternalY5002,4001,200,000ExternalY1,5001,9002,850,000Total4050,000 Original Budget Revised Budget = 3,900,000 3,850,000 = 150,000 increase in profitEastern Division:Original BudgetQuantityVariable CostTotalInternalX3,0003601,080,000ExternalY1,000800800,000Total1,880,000Revised BudgetInternalX2,000360720,000ExternalY500800400,000Total1,100,000 Original Budget Revised Budget = 1,700,000 1,000,000 = (780,000) decrease in profitNorth =300,000South=150,000Eastern=780,000Total=450000-780000=330,000 (decrease)Absorption costs will result into an increased selling price of the X and Y hence increase in theprofit made by the three divisions.b. Transfer price = incremental cost per unit:Wh ...
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