[olga0912]

Good luck everyone

[olga0912]

What is the right answer about Q4 – actuarial services?

[olga0912]

@jaffarkhan1 said:
Yeah I did, together with the engineers salaries that made their relevant cost.

I included only penalty $500 as relevant expense because engineers’ payroll is a fixed part of Company’s expense and wouldn’t depend on the contract with Push Co, contribution $5*40hours*2 engineers wasn’t included because ‘there is no job planned for the coming week and engineers can finish the job” so Company will receive contribution later and it is not relevant cost

[olga0912]

@hadpole said:
I did the same way except instead of $75, I used the optimum transfer price of $20 instead. So trf price to Division A is $20. I think the same answer will be derive since the Qns is only asking for effect on profit of the whole
Organization as a whole.

How did you get $20?

[olga0912]

Actually, I am not sure that my answer is correct, but my assumption was that as maximum production capacity of Division B was 200 000 units and maximum demand from external customers comprised 180 000 units, I recalculated sales revenue of Division B as 180 000 * $80 (price to external) and 20 000 * $ 75 (to Division A), and cost of fittings of Division A as 20 000 *$75 (bought from Division 🙂 and 60 000* $65 (bought from external supplier). Was it correct, how do you think?

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