快速查题-ACCA英国注册会计师试题

 Dust Co has two divisions, A and B. Each division is currently considering the following separate projects:  

                                                                             Division A                   Division B 

Capital required for the project                    $32.6 million             $22.2 million 

Sales generated by the project                    $14.4 million               $8.8 million 

Operating profit margin                                         30%                             24% 

Cost of capital                                                         10%                             10% 

Current return on investment of division            15%                               9% 

If residual income is used as the basis for the investment decision, which division(s) would choose to invest in the project? 

 Oxco has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B. It has no other outlet for sales. 

Current information relating to Division A is as follows: 

Marginal cost per unit                                                                                              $100 

Transfer price of the component                                                                           $165 

Total production and sales of the component each year                                2,200 units 

Specific fixed costs of Division A per year                                                     $10,000 

Cold Co has offered to sell the component to Division B for $140 per unit.

If Division B accepts this offer, Division A will be shut. If Division B accepts Cold Co’s offer, what will be the impact on profits per year for the group as a whole? 

 Summary financial statements are given below for JE, the division of a large divisionalised company: 

The cost of capital for the division is estimated at 11% each year. The annual rate of interest on the long-term loans is 9%. All decisions concerning the division’s capital structure are taken by central management. 

What is the divisional residual income (RI) for the year ended 31 December? 

 Perrin Co has two divisions, A and B. 

Division A has limited skilled labour and is operating at full capacity making product Y. It has been asked to supply a different product, X, to division B. Division B currently sources this product externally for $700 per unit. 

The same grade of materials and labour is used in both products. The cost cards for each product are shown below: 

Product                                                                                           Y                        X 

                                                                                                   ($)/unit              ($)/unit 

Selling price                                                                                600                     – 

Direct materials ($50 per kg)                                                   200                  150 

Direct labour ($20 per hour)                                                       80                  120 

Apportioned fixed overheads ($15 per hour)                           60                    90 

Using an opportunity cost approach to transfer pricing, what is the minimum transfer price? 

Fill in the blanks. 

 Ideally, a transfer price should be set that enables the individual divisions to maximise their profits at a level of output that maximises ……………………. . 

 The transfer price which achieves this is unlikely to be a ……………….. transfer price or a ……………. transfer price.  

 If optimum decisions are to be taken, transfer prices should reflect …………………. . 

There are two profit centres, A and B. Profit centre A transfers a product to profit centre B, but could also sell the product in an external market at a price of $30. The marginal cost of making the product in profit centre A is $8 per unit and the full cost is $14 per unit. There would be a variable cost of $1 per unit for sales and distribution to customers in the external market, but no such costs for internal transfers. 

To avoid disputes between the profit centre managers, what should be the transfer price for the product? 

$ _______

 Division Y of Chardonnay currently has capital employed of $100,000 and earns an annual profit after depreciation of $18,000. The divisional manager is considering an investment of $10,000 in an asset which will have a ten-year life with no residual value and will earn a constant annual profit after depreciation of $1,600. The cost of capital is 15%. 

Calculate the following and comment on the results. 

(i) The return on divisional investment before and after the new investment 

(ii) The divisional residual income before and after the new investment 

 Explain the potential benefits of operating a transfer pricing system within a divisionalised company. 

 Division B of a company makes units which are then transferred to other divisions. The division has no spare capacity. The following statements have been made regarding the minimum transfer price that will encourage the divisional manager of B to transfer units to other divisions: 

(1) Any price above variable cost will generate a positive contribution, and will therefore be accepted. 

(2) The division will need to give up a unit sold externally in order to make a transfer; this is only worthwhile if the income of a transfer is greater than the net income of an external sale. 

Which of the above statement(s) is/are true?