Management Accounting: Calculation of After Tax Operating Profit and Pricing Strategies

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:

1
MANAGEMENT ACCOUNTING
Table of Contents
Requirement of Scenario 1a.............................................................................................................2
Part 1a..........................................................................................................................................2
b. At market price rate.................................................................................................................4
Part 2............................................................................................................................................5
Scenario 1b......................................................................................................................................6
Part 1............................................................................................................................................6
Part 2............................................................................................................................................7
Part 3............................................................................................................................................7
Scenario 2........................................................................................................................................7
Reference.......................................................................................................................................10

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MANAGEMENT ACCOUNTING
Requirement of Scenario 1a
Part 1a
As per the question which is provided in the Scenario, the after tax operating profit of the
business is to be calculated. The company is engaged in the business of telecommunication
equipment manufacture. The calculation which is done is for Australian and US Division is give
below:
1) After Tax Operating Profit:
a) At Full Manufacturing Cost:
Particulars
Australia
Division USA Division
Nos. of Units Sold 10000 10000
Selling Price per Unit $800 $1,150
Total Sales Revenue $80,00,000 $115,00,000
Variable Cost per unit $550
Fixed Manufacturing Cost per unit $250
Total Manufacturing Cost/Transfer
Cost per unit $800 $800
Total Variable Cost $55,00,000
Total Fixed Cost $25,00,000
Total Trasfer Cost $80,00,000
US Import Duty $12,00,000
Total Operating Cost $80,00,000 $92,00,000
Net Operating Profit $0 $23,00,000
Less: Income Tax $0 $9,20,000
After Tax Operating Profit $0 $13,80,000
NET PROFIT $13,80,000
Figure 1: (Figure showing after tax profit operating profit for Australian and US Division)

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MANAGEMENT ACCOUNTING
Source: (Created by Author)
As per the calculations which is shown above, the business has two divisions which are
Australian Division and Us Division. As per the above computation, Australian division sells
B12 product at a transfer price which is equal to the rate of $ 800 and the same is shown to be
made up of variable and fixed expense (Rugman and Eden 2017). The Australian division is
unable to generate any profits for the period due to the costs of the business is equal to the sales
which the business is able to generate. In the case of US division, the selling price of the product
is set as $ 1,150 for which the business is able to generate profits of $ 13,80,000.