Sir
in this qs market based or cost based transfer price have to find out in solution how variable cost of 5346 calculated and how to give break even contribution to division (10m-2.674m) unable to understand this calculation
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june 2011 qs 1part b
10y ago#1Variable cost per repair = 135
Repairs needed = 440,000 x 9% = 39,600
Total variable cost = 39,600 x 135 = 5,346,000
To break even: Revenue - Variable costs = Fixed costs
So, Revenue = Fixed costs + Variable costs
Revenue = 1,980,000 + 5,346000 = 7,326,000
Revenue/repair = 7,326,000/39,600 = 185
Thanks sir.
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