ZAP has three divisions - Z, A and P, which make products Z, A and P...

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ZAP has three divisions - Z, A and P, which make products Z, A and P respectively. For Division A, the only direct material is product Z and for P, the only direct material is product A. Division Z purchases all its raw material from outside. Direct selling overhead, representing commission to external sales agents are avoided on all internal transfers. Division A additionally incurs 10 per unit and 8 per unit on units delivered to external customers and P respectively. A also incurs 6 per unit picked up from Z, whereas external suppliers supply at A's factory at the stated price of 85 per unit. Additional information is given below: Direct Materials (external supplier rate) Direct Labour Sales Agent's Commission Selling Price (in external market) Production Capacity (units) External Demand (units) Z 40 30 15 110 20,000 14,000 Figures (*)/unit A 85 50 15 170 30,000 26,000 P 135 45 10 240 40,000 42,000 Required DISCUSS the range of negotiation for Managers Z, A and P, for the number of units and the transfer price for internal transfers. ZAP has three divisions - Z, A and P, which make products Z, A and P respectively. For Division A, the only direct material is product Z and for P, the only direct material is product A. Division Z purchases all its raw material from outside. Direct selling overhead, representing commission to external sales agents are avoided on all internal transfers. Division A additionally incurs 10 per unit and 8 per unit on units delivered to external customers and P respectively. A also incurs 6 per unit picked up from Z, whereas external suppliers supply at A's factory at the stated price of 85 per unit. Additional information is given below: Direct Materials (external supplier rate) Direct Labour Sales Agent's Commission Selling Price (in external market) Production Capacity (units) External Demand (units) Z 40 30 15 110 20,000 14,000 Figures (*)/unit A 85 50 15 170 30,000 26,000 P 135 45 10 240 40,000 42,000 Required DISCUSS the range of negotiation for Managers Z, A and P, for the number of units and the transfer price for internal transfers.

Answer rating: 100% (QA)

Step 12 The Manager of Division Z will sell 14000 units outside at 110 per unit and earn contributio... View the full answer