• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

section c

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › section c

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 16, 2021 at 5:32 pm #625482
    xyzc
    Participant
    • Topics: 413
    • Replies: 175
    • ☆☆☆☆

    Question Man Co (Mar/Jun 16 amended)

    For part a) of this question, I am confused as to how the incremental profit/loss should be calculated. How to approach this question and from where to start calculating it.

    For part b) of this question, I replaced the cost of component L of 40 with the 37 external purchase price as this was lower. Is it correct. Also , how to draw a profit statement for the group as a whole, e.g. should the selling price of 96 or 40 be used when drawing up the group profit statement.

    June 17, 2021 at 8:11 am #625514
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    For part (a), as far as the group is concerned, the cost of making product L and transferring it internally is 12 + 6 + 2 = $20 per unit (there are no selling and distribution costs when selling internally).

    If product L is not make internally but is bought externally then it will cost $37 per unit.

    Therefore buying externally will cost the group and extra/incremental cost of 37 – 20 = $17 per unit. So the profit of the group would fall by $17 per unit.

    For part (b), the question says to use the current transfer price which is $40 per unit and to use the quantities calculated in (as) which is that M will buy all 120,000 units from L. Therefore the profit is the contribution of $26 per unit less the fixed costs.

    The question does not ask for a profit statement for the group as a whole and to prepare one would be wasting time (especially given that there are only 6 marks). As always, the group profit is the total of the profits in the two division.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Accounting for Management – ACCA Management Accounting (MA)
  • Hsaini on Accounting for Management – ACCA Management Accounting (MA)
  • kennedyavege@2023 on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in