Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. xn company manufacture and sell cricket bats. xn c

Xn company manufacture and sell cricket bats. Xn company has two departments Dept. P (...

50.1K

Verified Solution

Question

Accounting

Xn company manufacture and sell cricket bats. Xn company has two departments Dept. P ( making of cricket bats from wood) and Dept. Q ( add the cover and complete the product with the brand name printed). Dept P sells wooden Bats to Dept Q.

Dept. Q completes the product and sells the finished product to the external customer for OMR 70 per unit. Further information is as follows:

Dept. P Dept-Q

Number of units transferred/sold Material Cost per unit Labour Cost Other Variable costs per unit Annual Fixed costs

400 OMR 5

OMR 4 OMR 1

OMR 4000

400 OMR 3 OMR 3 OMR 1

OMR 3000

Required: i) Calculate Transfer Price based on Marginal Cost + 20%

ii) Calculate the budgeted annual profit for division P and Q and for Company as a whole under Marginal Cost + 20%

iii) Calculate Transfer Price based on Full Cost + 25%

iv) Calculate the budgeted annual profit for division P and Q, and for Company as a whole under Full Cost + 25%

v) Evaluate both divisional profits from the perspective of marginal and full cost transfer pricing and company.

vi) Discuss how the firm can achieve goal congruence using transfer pricing?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students