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Hi there,
I have a question. In the Dec 2011 F5 paper quetion 2 is a bit confusing for me. The first part of the question I di understand and can deal with, but the second part is a but werid. I don’t understand why the external materials for Div A are calculated as 60,000x$265+(20,000x$200) I thought the figure in the brackets was supposed to be (20,000x$65).
Can you help please? I have a lot more questions, but I just reaslised that won’t actually be able to figure them out on my own…
Thanks a lot
AtanaskaDividion A is buying 60000 externally and 20,000 from Division B.
For all of the 80,000 he has to pay $200 for ‘other materials’. The extra 65 is paid externally for 60,000 and internally for 20,000 (to :).
So…….externally he has to pay 80,000 x 200; and also 60,000 x 65 for the fittings he has to buy externally.
The 65 on the other 20,000 is paid to B and is shown on the profit statement separately as inter-divisional transfers.
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