Syarikat Aman Damai Sdn Bhd (ADSB) produces electric components. ADSB has two divisions, Division X and Division Y. Twenty percent (20%) of product produced by Division X are sold to Division Y and...

Extracted text: Syarikat Aman Damai Sdn Bhd (ADSB) produces electric components. ADSB has two divisions, Division X and Division Y. Twenty percent (20%) of product produced by Division X are sold to Division Y and the remainder are sold to outside market. ADSB policy requires the divisions to use variable cost as transfer price. Currently, Division X operates at maximum capacity of 100,000 units and sells to both Division Y and outside as follows: Sales (-) Variable costs Contribution margin Division Y RM450,000 RM450,000 RM0 Outside market RM4,000,000 RM1,800,000 RM2,200,000 Division X has an opportunity to increase the total sales for outside market by 20,000 units provided that the additional sales is at RM75 selling price. Division Y, on the other hand, can alternatively purchase its requirements from outside supplier at a price of RM85 per unit. REQUIRED: (a) Calculate the impact on Division X's contribution margin if it accepts the new opportunity. (b) Calculate the impact on contribution margin for ADSB if Division X accepts the new opportunity.