Academic Year Examination month Question Final Answer

2015/2016 Jan-16 1b) EV of Dua = 3.5m

EV of Tiga = 4.3m
2)a)NPV = RM2,062,000
b) Maximum price that should be paid RM3,862,000
c) Need to explain about AEC and LCM

3a)1. City Sdn Bhd would reject the proposal as the profit would reduce from RM1,00,
2.Division Cee would benefit from the proposal as the the profit would increase from R
3. Division Tee would reject the proposal as the profit would be substantially reduced.
b) optimal transfer price = RM540
c) refer to notes
4) A) a)i)WACU = 3.714, Breakeven point in units for Bee = 86154, Cee 64615
a)ii) WACU =3.5. Breakeven point in units for Bee = 80000, Cee = 8000
4)B) b) X = 800, Y =900
5)a) P = 3,600 - 0.0005x
b) x = 2,100,000, P = 2,550

2015/2016 Sep-15 2a) x=20,000; y = 66,000

b) Profit = 1,290,000
c) Slack hours for test time = 4,267
Slack program time = 7,267
d) Profit = 1,200,000
3)

4) NPV 4,236,000
5)a) P = 6.99 - 0.00005x
x = 45,900, P = 4.70
b) Monthly contribution =105,570

2015/2016 Jan-15 1)A)a)i) The highest of these is RM300, therefore should choose to order at medium le
a)ii)The highest of these is RM600 , therefore choose to order at high level to meet goo
iii)Minimax regret rule – identify the level of order that ensure the decision maker mad
Profit based on imperfect information
Profit based on perfect information
 -Good demand level (600 X 35%) 210
-Average demand level (400 X 45%) 180
-Poor demand level (300 X 20%) 60
Maximum amount the company should pay to acquire perfect information
2)(b)B = 30, A = 10. Contribution generated 2600
(c) Shadow price 2.8
(d) P=82.50 - 0.0003x
x =102,500, P =51.75. Monthly contribution RM3,151,875
Q4)a) NPV2,084,750
b) Machinery cost can increase by 69.5%
5)B)(i) Transfer price = RM180
(ii)Wanderful has no alternative opportunity for the 4,000 components. It should there
The remaining components should be offered at the adjusted selling price of RM180 as

2016/2017 January 1(a) m =11%

1(b) NPV = 11786
2(a) Total fixed production cost pa = 10 mil
(b) x =137,500, P =172.50, profit = 8906250
3 (a) at RM30; Profit 1020000, 810,000, 1440000; at RM 35; Profit =1228000, 1020000

(b)(i) Maximin, RM35 to earn highest lowest profit at 870,000

(ii) Maximax, RM30 to earn the highest max profit at 1.44mil
(iii) EV , RM35 to earn the highest exp profit at RM1,022.4
4(a) X = 400, Y = 500
(b) total contribution = 66,000
(c) shadow price = 30.30
(d) resultant profit = 66,000
5 (a)Based on the above profit statement, Division Y will produce and sell a total of 3,6
Based on the above profit statement, Division Y will produce and sell a total of 5,000 u
Conclusion - The Division Y’s manager suggestion is true hence should be adopted to e

2016/2017 sept 1(a) P = 67.5, x=17,500, profit = 200000

2(a) x =800, y = 550
(b) Shadow price = 4.65
(c)The shadow price for chicken meat is RM4.65. If one additional kg of chicken meat i
(d) Slack of the machine time = 500
3(a) Annual profit = 309000, 364000, 419000, profits per unit = 10.3, 10.4, 10.475
(b) Expected demand =33500, Expected cost of clothes =14.5
Total profit = 364250
5 (a) NPV = 739745
(b)(i) 17.79%
(b)(ii) 225%
(a)

From the group’s perspective

For every component K sold externally, Division A will generate a profit of RM5 (RM4

Division A’s total capacity is to produce 100,000 units per annum. As external sales is o

To determine the transfer price for the 50,000 units transferred from Division A to Divi

From the perspective of Division A

As Division A can only sell a maximum of 50,000 units externally, the balanced capaci

From the perspective of Division B

Division B is able to obtain all it supplies from external supplier at RM37 hence it will

Conclusion – Based on the above analysis, the transfer price should be set between RM
 would reduce from RM1,00,000 to RM700,000
profit would increase from RM700,000 to RM910,000
uld be substantially reduced.

86154, Cee 64615

, Cee = 8000

hoose to order at medium level.

rder at high level to meet good conditions
sure the decision maker made the least regret of making the wrong decision√. The lowest of the maximum regret is to order at medium lev
n RM415√
0
80
RM450√
√
perfect information RM35√

components. It should therefore offer to transfer this quantity at marginal cost. This is variable cost less packing costs avoided = RM128 —
ed selling price of RM180 as in (i)

5; Profit =1228000, 1020000, 870000

roduce and sell a total of 3,600 units √√ of GogoCar as at this price level and quantity, the division will earn the highest possible profit for t
ce and sell a total of 5,000 units √√ of GogoCar as at this price level and quantity, the division will earn the highest possible profit at RM27
hence should be adopted to ensure corporate optimality to be achieved. √√

ditional kg of chicken meat is made available, contribution will increase by RM4.65. Shadow price represents the maximum premium the c

unit = 10.3, 10.4, 10.475

enerate a profit of RM5 (RM40 – RM35) for the group as a whole. For every component K which Division B buys externally, it will incur a

annum. As external sales is only limited to 50,000 units, the balance of 50,000 units can be transferred between Division A to Division B. T

rred from Division A to Division B, the following should be considered:

xternally, the balanced capacity can only be taken up with production to Division B hence the lowest price it would be prepared to charge wi

pplier at RM37 hence it will be not be willing to pay anything higher than RM37, ie the maximum transfer price.

ce should be set between RM33 to RM37. √From the group’s point of view, the total group profit will be the same regardless of where the
m regret is to order at medium level. √
acking costs avoided = RM128 — RM20 = RM108 per componen

n the highest possible profit for the division at RM244,800. However, at this quantity, the company as a whole will only earn RM284,400 of
highest possible profit at RM275,000. This is a goal congruent decision resulting in the company earning the highest profit of RM295,000.

nts the maximum premium the company should pay to acquire one kg of chicken meat
B buys externally, it will incur additional cost of RM 4(RM37 – (RM35 – RM2)) . Therefore from the group point of view, external sales sh

ween Division A to Division B. These amount should be purchased internally by Division B since the cost of buying at RM37 from external

t would be prepared to charge will be the marginal cost of making the extra units since fixed cost is expected to remain the same ie at RM33

he same regardless of where the transfer price is set within the range. However, to motivate both managers to act in goal congruent manner
ole will only earn RM284,400 of contribution which is lower by RM 11,100 than the potential highest profit of RM295,000 √√. The transfer
he highest profit of RM295,000. At the same time, Division X will earn an additional profit of RM 20,000 [(RM12 – RM8) X 5,000] for the int
p point of view, external sales should be made given priority before internal transfer.

f buying at RM37 from external supplier is higher than the internal manufacturing cost of RM33. As a total component required is 60,000 u

d to remain the same ie at RM33. However, Division A will want to earn some profit from the additional units produced to Division B and

to act in goal congruent manner and given the external sales that Division B has to pay from external supplier, the transfer price will most li
 t of RM295,000 √√. The transfer price of RM19 will result in a goal incongruent decision to be made and hence should be revised. √√
RM12 – RM8) X 5,000] for the internal transfer.
l component required is 60,000 units (30,000 units of Kiki X 2 components per unit Kiki) , the balance of 10,000 units can be purchased ext

nits produced to Division B and therefore would want to transfer at a price higher than RM33.

er, the transfer price will most likely be at the higher end of the range.
ence should be revised. √√
0,000 units can be purchased externally at RM37 per unit.