e) State the advantages of divisionalization Question 3 [40 points) GAC Motors is a divisionalized firm with a transfer policy in place

Subject:AccountingPrice: Bought3

Share With

e) State the advantages of divisionalization Question 3 [40 points) GAC Motors is a divisionalized firm with a transfer policy in place. The Aerodynamic Division manufactures a component required by the Motor Assembly Division for which there is currently no external market. One unit of the component is required for every fine output. The Motor Assembly Division's projected selling price and output are as follows Net selling price (N) Quantity sold (Units) 1500 2,000 1300 3,000 1200 4,000 950 5,000 The costs for each division are as follows: Aerodynamic (N) Motor Assembly () Variable cost per unit 220 140 Fixed costs attributable to the product 1,200,000 1.800,000 The transfer price for the intermediate product is A1700 on cost-plus mark-up basi Required: a) Show the profit computations for the divisions and the company as a whole the optimal decision for the firm? b) Suppose that an external market can be found but will result in additional of N500,000 and additional variable costs of A140/unit with an external sal N1900 per unit. How will this affect the decision of the Aerodynamic Division Instructions: Attempt All Questions i) Time Allowed - 90 minutes) Score - 100 points Question 1 [30 points) Management accounting information communicates key metrics that are useful to various stakeholders in an organization. State and discuss, in detail and with suitable examples, five (5) qualities of good management accounting Information. Question 2 (30 points) A company has two divisions, Small and Big. Big Division has net assets of 18 trilion, and makes an annual profit of N900,000. Small Division has net assets of $400.000 and makes an annual profit of N90.000. The cost of capital for both divisions is 10% and 80% of profits are controllohla