Reference no: EM132835308
Cristopher Company is a mini-conglomerate with many divisions. In 2018, the management of the company commissions its engineering and construction division to build a plant for its manufacturing division.
The costs incurred for the construction of the plant are as follows;
Constructors' cost, P11,200,000;
Direct materials and labor cost used in construction, P8,500,000;
Engineering and technical overheads, P2,500,000;
Capitalizable borrowing cost, P2,000,000, and
General administrative costs, P3,000,000.
Problem 1: Of the direct materials and labor cost used, P1,300,000 is attributable to costs inefficiencies caused by a labor strike. The capitalizable borrowing cost is computed based on the weighted-average expenditures of the construction; however, actual interest incurred only amounts to 1,800,000. The transfer price between the two divisions is P30,000,000. The manufacturing division records the plant at the transfer price. A similar plant could have been purchased at a price of P28,000,000. At what amount should the Plant be properly initially recorded?
A. 52,000,000
B. 22,700,000
C. 22,000,000
D. 22,900,000
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