(Accounting for Decision Making Jerold L.

Zimmerman TMH pg 201)

Selling Div Buying Div
Fixed Cost 15000 10000
Variable Cost 10 20

Demand for Buying Division

Qty Price Per Unit Total Revenue
100 200 20000
200 180 36000
300 150 45000
400 130 52000
500 120 60000
600 104 62400

TP charged by SD to BD = (SD unit cost+ FC+ Profit)= 10+75+10= 95

BD Cost and Revenue
Q TP to be Total Total
nty BD Cost ( FC + Proportionate VC) paid Cost revenue Profit/Loss
100 12000 9500 21500 20000 -1500
200 14000 19000 33000 36000 3000
300 16000 28500 44500 45000 500
400 18000 38000 56000 52000 -4000
500 20000 47500 67500 60000 -7500
600 22000 57000 79000 62400 -16600

SD Cost and Revenue

Qnty FC+VC Revenue Profits

100 16000 9500 -6500
200 17000 19000 2000
300 18000 28500 10500
400 19000 38000 19000
500 20000 47500 27500
600 21000 57000 36000

BD Total Toatl Co's

SD Cost Cost Cost Rev(BD's) P/L
FC+VC
16000 12000 28000 20000 -8000
17000 14000 31000 36000 5000
18000 16000 34000 45000 11000
19000 18000 37000 52000 15000
20000 20000 40000 60000 20000
21000 22000 43000 62400 19400