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Question 5 Elba Division of Hainnes Industries manufactures product Zylo. 75% of the...

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Accounting

Question 5
Elba Division of Hainnes Industries manufactures product Zylo. 75% of the production is transferred to the Crete Division; the remainder is sold externally for R670 per unit. The following information is available about product Zylo:
\table[[Total production annually,1200000],[Variable production costs,R400],[Variable selling costs (includes R40 per unit in advertising costs),R160],[Fixed overhead (allocated on the basis of units of production),R18000000],[Fixed selling costs (allocated on the basis of units of production),R24000000]]
Required:
5.1 Determine the transfer price under each of the following methods:
a. Market price
b. Variable production costs plus fixed selling costs
c. Full production costs
d.110% of variable production costs
5.2 What is the minimum transfer price that Elba Division should use to transfer the units to Crete Division? Why?
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