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std cost 8 8
Soltuion to questions Assuming SP to be constant and using transfer price calculated as above: Sales vol 9000 7000 5000 2000 0 Profit 38600 (28-22.6)*units-10000 27800 17000 800 -10000
23 -6000
22 -16000
Decision would be keep SP constant since profit is higher Using transfer price to be split inot fixed and variable, fixed portion of Div A would be 40000 variable portion would be 4 Assuming SP to be constant and using transfer price calculated as above: Sales vol Contribution (28-14) Less:FC Profit 9000 126000 96000 30000 7000 98000 96000 2000 5000 70000 96000 -26000 2000 28000 96000 -68000 0 0 96000 -96000
Profits would not change under either of the methods if sales volume is 10000 units