1
Internal transfers at
market prices
(Method Ab bInternal transfers at
110% of
full costs
(Method B)
Mining Division Revenues
€90
× 400,000 units a ×
400,000 units
€36,000,000
€26,400,000
Deduct Division variable costs
b
× 400,000 units
20,800,000
20,800,000 Division fixed costs
c
× 400,000 units
3,200,000 3,200,000 Division operating income
€12,000,000 €2,400,000
Metals Division Revenues
€150
× 400,000 units
€60,000,000
€60,000,000 Deduct
Transferred-in costs
€90
× 400,000 units €66
× 400,000 units
36,000,000
26,400,000
Division variable costs
d
× 400,000 units
14,400,000 14,400,000 Division fixed costs
e
× 400,000 units
6,000,000 6,000,000 Division operating income
€3,600,000 €13,200,000 ab Variable cost per unit in Mining Division = Direct materials + Direct manufacturing labour + 75% of Manufacturing overhead = €12 + €16 + 75% × €32 = €52. c Fixed cost per unit = 25% of Manufacturing overhead = 25% × €32 = €8. d Variable cost per unit in Metals Division = Direct materials + Direct manufacturing labour + 40% of Manufacturing overhead = €6 + €20 + 40% × €25 = €36 e Fixed cost per unit in Metals Division = 60% of Manufacturing overhead = 60% × €25 = €15
2
Bonus paid to division managers at 1% of divisional operating income will be as follows
Share with your friends: |
