Moon is a furniture company manufacturing different types of furniture. One of its products Double Bed...

 

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Moon is a furniture company manufacturing different types of furniture. One of its products Double Bed is very popular because of its unique design and comfort. Company has two divisions Bed Division (B) and Mattress Division (M) Division B produces Bed and Division M produces Mattresses. Both the divisions are profit centers. Division B sells Bed with Mattresses to external customers while Division M sells Mattresses to Division B and to external customers. Division B produces 5,000 Beds every year and External demand for the Beds is also 5,000. The additional data available for both the divisions is as follows: Division B Selling price of Bed+ Mattress Cost of Bed Mattress OMR 300 Mattress from Division M- as per the company's policy Other Material Cost Labour Cost Fixed Cost per Year Department M Cost of Each Mattress Material Cost Labour Cost OMR 60 OMR 30 OMR 500,000 OMR 40 OMR 20 Fixed Cost per year OMR 300,000 Number of Mattresses Produced and sold - 15,000 Mattresses External demand for Mattresses is 12,000. Moon Company has set a pricing policy for the mattresses supplied by Division M to Division B at a Marginal cost + 15% to 20%. Division M is bound to sell 5000 mattresses to Division B and remaining to the external supplier for OMR 80 per mattress Required: a) Calculate Transfer price of the mattress supplied by Division M to Division B Under the pricing Policy set by the Moon Company 8 Marks b) Using the appropriate format Prepare a profit statement For Division B. 8 Marks c) Showing the Internal and external sales separately Prepare a profit statement For Division M using appropriate format. Marks d) Evaluate both profits from the prospective of division M and Division B and suggest about the Goal congruence Decision Making 6 Marks Moon is a furniture company manufacturing different types of furniture. One of its products Double Bed is very popular because of its unique design and comfort. Company has two divisions Bed Division (B) and Mattress Division (M) Division B produces Bed and Division M produces Mattresses. Both the divisions are profit centers. Division B sells Bed with Mattresses to external customers while Division M sells Mattresses to Division B and to external customers. Division B produces 5,000 Beds every year and External demand for the Beds is also 5,000. The additional data available for both the divisions is as follows: Division B Selling price of Bed+ Mattress Cost of Bed Mattress OMR 300 Mattress from Division M- as per the company's policy Other Material Cost Labour Cost Fixed Cost per Year Department M Cost of Each Mattress Material Cost Labour Cost OMR 60 OMR 30 OMR 500,000 OMR 40 OMR 20 Fixed Cost per year OMR 300,000 Number of Mattresses Produced and sold - 15,000 Mattresses External demand for Mattresses is 12,000. Moon Company has set a pricing policy for the mattresses supplied by Division M to Division B at a Marginal cost + 15% to 20%. Division M is bound to sell 5000 mattresses to Division B and remaining to the external supplier for OMR 80 per mattress Required: a) Calculate Transfer price of the mattress supplied by Division M to Division B Under the pricing Policy set by the Moon Company 8 Marks b) Using the appropriate format Prepare a profit statement For Division B. 8 Marks c) Showing the Internal and external sales separately Prepare a profit statement For Division M using appropriate format. Marks d) Evaluate both profits from the prospective of division M and Division B and suggest about the Goal congruence Decision Making 6 Marks

Answer rating: 100% (QA)

Moon Company Ans External Demand for Division 13 5000 Production Capacity of ... View the full answer