Managerial Accounting

Assignment 3
Question 1

Question 2

Question 3
a) It would be beneficial for the company as a whole if logs were transferred to the Sawing Division at the suggested price of $61.50 per log.
CM from selling externally = $75 - $40.50 - $9.50 = $25/unit
$25 x 10,000 units = $250,000
CM from selling to Sawing division = $122-Trasnfer costs from Harvesting-Production costs = $122-40.50-9.50-35-4.5-2.5 = $30/unit
$30 x 10,000 units = $300,000
$300,000 - $250,000 = $50,000
The CM is greater by $5 per unit if selling to the Sawing division.
b) If the logs were transferring to Sawing division at $61.50 per unit, the company as a whole would still be making profits. In the meantime, the Harvesting division manager might become less inclined to perform at maximum ability while each unit could have been sold externally for $75 per unit. The Sawing division manager would not be affected since the transfer costs from Harvesting division stays the same.
c) Both the maximum and minimum transfer price would be $75, the market price, since now both the Harvesting and Sawing divisions are operating at full capacity. Below $75, contribution would not be maximized; the opportunity cost of contribution margin forgone would increase. Also, the objectives of goal congruence and optimal sub-unit performance would not be met.
Question 4
a) Market share variance: Actual market size in units x (Actual market share - Budgeted market share) x Budgeted contribution margin per composite unit for budgeted mix

= 380,800 x (0.1425446-0.1655) x $51.5438067 = 450,565.87U

Market size variance:
(Actual market size in units - Budgeted market size in units) x Budgeted market share x Budgeted contribution margin per composite unit for budgeted mix
= (380,800 -374,000) x 0.1655 x $51.5438067 = $58,007 F
b)
Sales Quantity Mix
=
{Actual units of
-
Budgeted units of x Budgeted sales x Budgeted

all products sold

all products sold}

Mix %

CM / unit

= (380,800-374,000) x 0.15 x