- This topic has 5 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
hi sir,
i am doing a qn from December 2012
the part c of this qn is asking for the profit using abc method which was calculated in part b
when calculating for the assembly division i used the selling price as 220.17 and 241.69 for division s and r respectively and the cost as 311·93 and 187·83 for division s and r respectively (i got the cost from part b using abc) where i got a loss for product s and profit for product r after this i multiplied it with the sales unit to get the total profits and loss
after checking the examiners suggested answer he used the 28·36 and 17·08 (the mark up of 10% calculated in part b) and multiplied it with the production and sales units to get the total profit.
well i managed to calculate the total profit for retail division but i dont understand the approach used by the examiner to calculate the assembly division.
please sir kindly help me..I am a bit puzzled that you are OK about calculating the profit for the retail division, but not for the assembly division (because it is retail division that needs more thought 🙂 ).
The assembly division is charging the retail division at cost + 10%. So since product S has a cost of 283.57 and is therefore adding a 10% mark-up, they are making a profit of 28.36 on every unit sold to the retail division. They are selling 3,200 units, so the total profit on product S is 3,200 x 28.36 = 90,752. It is the same logic for the sales of product R.
Have you watched my free lectures on ABC and on transfer pricing? (I do hope you are not trying to learn for the exam by just working through Revision Kit questions – that will not work for ACCA exams. You do need to have studied first, either by watching our lectures or by working through a Study Text.)
The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
(Forgive me, but I have to ask because it is puzzling me 🙂 How is it that last year you were studying for P4 but this time you are studying for F5? 🙂 )
hi sir,
actually this is my elder sisters account and i am using it temporarily she was doing p4 and she passed her exams and completed ACCA.:)
i have study the topic of transfer pricing from kaplan study text and i watch your lectures on transfer pricing..
i was able to calculate the retails division total profit because as i know the formula of finding the profit is selling price- costs=profit so the costs and selling price was calculated in part b and given respectively so this became easy for me to calculate..
sir i am still confused why did we use the mark-up% only.. as you explained they use cost plus 10% we used the 10% but not the cost, i mean i want to know why didnt we add the cost of 283·57 and 170·75 to the mark up as the said cost plus 10%..and the other thing that is confusing me is the transfer prices of 220.17 and 241.69..
i am sorry sir for troubling you with my question inspite you gave me an explanation, i dont know why i am unable to understand the logic..
please help me sir.. thank you sir for your continuous support..:):)
Tha mark-up is the profit as a % of the cost.
So if they add 10% to the cost, this gives the selling price. The selling price less the cost is the profit (which will be 10% of the cost).
- The topic ‘wash co’ is closed to new replies.