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ACCA Applied Skills · Performance Management · Divisional performance and transfer pricing

Division Alpha reports the following for the year: sales $900,000; variable costs $450,000; directly traceable controllable fixed costs $120,000; non-controllable traceable fixed costs (depreciation on assets bought by head office) $80,000; apportioned head office costs $60,000. What is the divisional controllable profit?

Controllable profit is $330,000: sales of $900,000 less variable costs of $450,000 and controllable fixed costs of $120,000. Non-controllable traceable costs and apportioned head office costs are excluded, because the divisional manager cannot influence them.

  1. A$330,000Correct
  2. B$250,000
  3. C$190,000
  4. D$270,000

Explanation

Controllable profit = 900,000 - 450,000 - 120,000 = $330,000. Deducting the $80,000 non-controllable traceable cost gives $250,000 (the divisional profit), and deducting the $60,000 apportionment as well gives $190,000, which are not controllable measures.

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