Strategic Management Accounting Professional - Desklib

STRATEGIC
MANAGEMENT
ACCOUNTING
PROFESSIONAL

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Q1. a) State the production plan that will help in increasing the weekly profit of Gemini plc
and prepare statement which highlights profit earned with the help of project plan.............3
b) One suggestion which would help to improve number of hours worked using existing
machinery by working overtime. ..........................................................................................5
Q3. Explain two transfer pricing method. State its benefits and limitations as well..............5
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The report prepared below explains how productions plans would work as a helping hand
in increasing the weekly revenue of Gemini plc company. It would also provide an idea about
how transfer pricing work that explains evaluation of performance during a certain period of time
and what are possible uses of market based transfer pricing which takes into account price which
has to be paid between different departments. Full cost transfer pricing can be explained as
pricing that includes all costs from variable till fixed costs. It is a summation of all costs incurred
during the production of product and how can they be covered and minimized as well. It helps to
have an idea about how market analysis work and how it can be useful for proper and better
functioning of a business. It helps business to understand what could be the benefits of such
transfer pricing and how it can affect company in long run (Chao, 2019).
TASK
Q1. a) State the production plan that will help in increasing the weekly profit of Gemini plc and
prepare statement which highlights profit earned with the help of project plan.
Contribution per unit = Sales price – Variable costs
Variable costs = Direct materials + Direct labour + Variable overhead
Product A
£
B
£
C
£
D
£
Selling price 28 34 45 46
Less: Variable
cost per unit
Direct materials -6 -7 -9 -7
Direct labour -5 -5 -10 -10
Variable
overhead
-3 -3 -6 -6
Contribution per
unit
14 19 20 23

Maximum machine hours per week = 2000hrs and they highlight limitation factor. For
organisation four product are required :
Product A – Demand per week * Machine hours = 200*4 = 800mch
Product B – Demand per week * Machine hours = 180*3 = 540mch
Product C – Demand per week * Machine hours = 250*4 = 1000mch
Product D – Demand per week* Machine hours = 100*5 = 500mch
Total machine hours needed = 2840
Product A B C D
Contribution 14 19 20 23
Machine hours 4 3 4 5
Contribution per
machine hour
3.5 6.33 5 4.6
Ranking 4 1 2 3
Relatively products which possess higher probability of profit are product B, C and product D.
Thus it is suggested that business must focus on producing such products at first place (Verčič,
and Špoljarić, 2020).
Profit statement for the production plan
Product Quantity units Machine hours Contribution
B 180 540 3.42
C 250 1000 5
D 92 460 2.12
Less: Fixed overhead -8
Net profit 2.54
Working note: