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conference co has a divisionalized structure. one of its division, Division X, sells all its output to other divisions within the company
Division X’s annual budgedet output and costs are as follows:
Unit Sold 1050
direct materials $22,500
direct labour $45,350
overheads (40% variable) $37,150what transfer price per unit will result in a profit margin of 20% for Division X (to the nearest whole $)?
Sir please tell me whether fixed part of overhead should be included in calculation or not?
This question is not in the sample questions from March 2020 on the ACCA website.
Subject to anything else written in the question, the fixed part of the overheads should not be included.
Sir if u go to the examiner’s report of march 2020 in the acca website ,this is the first question in which they have included the whole amount of overhead but I am unable to understand the reason for it as you have mentioned in your lecture and for other questions also, not to consider it.It will be geat if you just have a look and explain me .Thanks Sir
The answer is correct to include the fixed overheads because the question says that they sell all their output and it is clear that there is only one product being made.
I know you typed out the whole question, but I read it too fast. Normally we assume that they make many products in which case we would then ignore the fixed overheads.
@tiwari.ekta would you mind sharing the link to march 2020’s paper you are talking about?
Would be highly obliged if you could do so!
It is in the examiners report on the ACCA website, as tiwara.ekta wrote.
The report just has one or two questions. The exam itself is not available.
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