7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25

7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The cost per unit of the three products, A, B and C of a concern is as follows : A B C $ Direct Materials 10 8. 9. Direct Labour 7 Variable Expenses Fixed Expenses 4 3 Total Cost Profit 23 23 20 7 Selling Price Number of units produced 32 30 26 10,000 5,000 8,000 Production arrangements are such that if one product is given up, the production of the others can be raised by 50%. The directors propose that C should be given up because the contribution in that case is the lowest. Do you agree ?
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