a) Calculation of Return on Investment

Controllable profit calculation

Sales External [35*400*270]
Internal [13700*180]

Less:Controllable costs
Puchases [20*350*450]
Variable external selling costs 1%
Delivery costs [140*450]
Veterinary costs [0.20*350*450+0.3*400*450]
Feeding costs
Fixed production overheads
Head Office expenses [not controllable]
Depreciation
Finance cost on the loan [not controllable]
Controllable Profit per month [1 month]

Annual controllable profits [12 months]

Controllable investment calculation

PPE Cost
Accumulated depreciation
Carrying amount
Receivables
Bank [12m-3150000]
Long term loan [not controllable]
Payables
Controllable investments

Return on investment [profit/investment]

b) Tranfer price calculation

Maximum capacity
External demand
Available for internal demand
Internal demand
Sacrificed external sales

Variable cost per unit

Purchases
Delivery costs
Veterinary costs
Feeding costs
Total Variable costs
Total number of cattle

Variable cost per unit [4648500/450]

Variable external selling costs 1% [37800/270]
Total Variable costs per unit

Contribution [35*400-10470]

Lost contribution[3530*125]

Transfer price [10330+441250/200]

e) Income statement

Sales 4185

Less: Cost of sales balancing

Joint costs balancing
Futher processing costs
Refrigerating costs

Gross Profit
Less: other non-manufacturing costs
Variable costs
Fixed costs

Net Profit

Net Profit percentage

f) Target mark up calculation

Total return (Total profit) [4m*8%]

Calculation of the total units produced

Total hours available [7*220]
Standard [2kg*60/40] Hour
Total kg
No. of units 3.5kg=1unit

Mark-up per unit

 Maximum capacity
R Operating capacity [75%]
3,780,000
2,466,000 External sales [60%]
Internal sales [40%]
6,106,300 Weight of the cow at sale
3,150,000
37,800 External selling price/kg
63,000 Internal selling price/cow
85,500
1,350,000 Weight of cow at purchase
1,000,000 Purchase price per kg
- Delivery cost per cow
420,000
- Veterinary costs
139,700 01 May 2018
31 May 2018
1,676,400

25,200,000
15,120,000
10,080,000
 2,000,000
8,850,000
-
(1,600,000)
19,330,000

8.67%

Units
600
(525)
75
(200)
(125)

3,150,000
63,000
85,500
1,350,000
4,648,500
 450

10,330
140
10,470

3,530

441,250

12,536

By-product
Premium Cuts Standard Cuts Offal
30,801,600 34,149,600 3,636,765

26,181,360 29,027,160 330,400

25,926,840 28,827,160
90,000 100,000 200,000
164,520 100,000 130,400

4,620,240 5,122,440 3,306,365

1,000,000 1,000,000 60,365
900,000 800,000 60,365
100,000 200,000 -

3,620,240 4,122,440 3,246,000

11.75% 12.07%

R
320,000

1,540
3
4,620
1,320

242.42
um capacity 600
ng capacity [75%] 450

al sales [60%] 270

l sales [40%] 180
of the cow at sale 400

al selling price/kg 35
l selling price/cow 13,700

of cow at purchase 350

se price per kg 20
y cost per cow 140

ary costs
0.20
0.30
 Total
64,951,200

55,208,520
54,754,000 56m+2m-3246000
190,000
264,520

9,742,680 15%
2,000,000
1,700,000
300,000

7,742,680

11.92%