P2 Exam Dumps : Advanced Management Accounting

Which of the following is the ideal basis to use for a transfer price when there is a perfect external market?

K Supermarket spends $80,000 per year on checking and processing receipts of inventory. Annual warehouse costs are a further $70,000 per year. These costs are currently treated as fixed overheads in the company's costing system.

As an experiment, the company is preparing a direct profitability analysis of a small range of products, including fresh grapes.

K Supermarket receives a total of 3,600 deliveries every year. 20% of these deliveries are of perishable goods such as grapes. It takes twice as long to process a delivery of perishable goods compared to a normal delivery because perishable goods have to be checked more carefully.

Half of the warehouse costs are for the chilled store that is used to store perishable goods. At any time, the chilled store has 800 kilos of perishable goods in stock.

K Supermarket receives 150 deliveries of grapes every year. Each delivery is for 100 kilos of grapes. The grapes spend an average of two days in the chilled store before they are sold.

Calculate the total cost per kilo of checking, processing and storing grapes that should be taken into account in determining the profitability of grapes.

Give your answer to the nearest whole cent.

LL produces an item, the Z, for which the demand curve is estimated to be:

P = 10 - 0.0001Q

where, P is the unit price in $ and Q is the annual sales volume in units;

Marginal revenue (MR) = 10 - 0.0002Q

The variable cost of producing the Z is $2 per unit. The annual fixed costs of production are $110,000.

What is the profit maximizing output level?