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Hello Mr John,
could you please explain this question ,it is little bit confusing,
why they took M C only for the balance amount of sales 2210000whereas the transfer price is for the whole $7550000
such question will be tiff in exam,
Thanks for help,
It is because C is currently only selling externally 60% of what the external customer wants. So they could sell the external customer the extra 40%.
This means that in total they could sell to the external customer an extra 40/60 x 8010 = 5340.So of the current transfers, 5340 of them could be sold externally (and therefore if they are transferred they have to be changed at 5340), but the rest of the current transfers could not be sold externally and so they could transferred at marginal cost.
Part (b) is very tricky. However do remember that you need to be getting more than 50% on each question to be passing. Part (a) is pretty easy and you should be able to get full marks. However hard you find part (b) you should certainly be able to get a few marks, and then you have passed the question.
Overall, the examiner is very fair – in all questions you should be able to get the half marks without too much problem and hopefully in some of the questions you will be able to get many more than half marks 🙂
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