1. Calculate the profit for each division and for SW as a whole in columnar format(table format) using the current transfer pricing policy. your answer should clearly show the revenue and cost figures for internal and external sales where relevant.

2. Based on the new policy, and assuming it is the best for RP, calculate the number of kilograms that RP should sell externally and the number of kilograms that RP should sell internally. Provide detailed justification of how you arrived at the transfer price.

3. Using the old transfer pricing policy, what minimum price should the RP charge for the extra units required by the TP division if the TP division wants to meet their maximum demand for the OTR tyre. Provide justification of how you arrived at the transfer price

Questions 31 marks) Super Who (W) is a manufacturing company with main manufacturing division in Gobabi where rubber i produced its main product that is to the market is an OTR tyre used in construction vehicles. The company sources tree gum in the area which is to produce rubber. Most of the rubber is the sold to its tyre manufacturing division and the rest is sold in the market mainly to shoe manufacturers. Thus, the company has two division, the rubber producing division (RPT) and the tyre producing division (TP) The following information relates to the TP division NS 22000 TP division Seling price for Tyre Costs per ID Rubber from RP ORION (per me) Other Ingredients formally curoad Direct labour COSE End Overheads per year Unes of TP produced and sold tocmyndina pery Maximum demandinn for TP per your 8000 4500 3 500 34 600 000 15 000 14.000 The information relating to the RP division is also presented as to RP division Selling price per gram of rubber match day NS 100 150 05 Selling price per kogtoral cutomerspers) Tree our traction costs cost of materials per al Labour costs per Find overheads per year 20 000 000 Annual capolylograms) Internal is (ograms) External comand in ograms 1 800 000 1 200 000 800 000 The RP division Incurs a variable daton cool of 155 for each kilogram of nabiber that its outside. The Head Office current endors that the TP division buys its tyres from the division. However the recent moment the RP division cannot increase their supply of rubber to the TP division due to the mited supply of trees to produce rubber The tree from which the gums tracted are in short supply and the company has a fud quota of gum that can extract over the next five years as imposed by the Ministry of Forestry The divisional head of the TP division presented the segment that the Head Office could allow her to source rubber may she to get a cty the price that the RPGsion is selling to them with an additional per kilo for transportation cost Give these squabbles the Head Office of SW held a meeting with both divisional heads and allowed the TP Go to purchase rubber from outside as long as the SW profit will be named For simply you may assume that the TP division bys be from the RP division in the same package designed for eidemala Page 14 15 Questions 31 marks) Super Who (W) is a manufacturing company with main manufacturing division in Gobabi where rubber i produced its main product that is to the market is an OTR tyre used in construction vehicles. The company sources tree gum in the area which is to produce rubber. Most of the rubber is the sold to its tyre manufacturing division and the rest is sold in the market mainly to shoe manufacturers. Thus, the company has two division, the rubber producing division (RPT) and the tyre producing division (TP) The following information relates to the TP division NS 22000 TP division Seling price for Tyre Costs per ID Rubber from RP ORION (per me) Other Ingredients formally curoad Direct labour COSE End Overheads per year Unes of TP produced and sold tocmyndina pery Maximum demandinn for TP per your 8000 4500 3 500 34 600 000 15 000 14.000 The information relating to the RP division is also presented as to RP division Selling price per gram of rubber match day NS 100 150 05 Selling price per kogtoral cutomerspers) Tree our traction costs cost of materials per al Labour costs per Find overheads per year 20 000 000 Annual capolylograms) Internal is (ograms) External comand in ograms 1 800 000 1 200 000 800 000 The RP division Incurs a variable daton cool of 155 for each kilogram of nabiber that its outside. The Head Office current endors that the TP division buys its tyres from the division. However the recent moment the RP division cannot increase their supply of rubber to the TP division due to the mited supply of trees to produce rubber The tree from which the gums tracted are in short supply and the company has a fud quota of gum that can extract over the next five years as imposed by the Ministry of Forestry The divisional head of the TP division presented the segment that the Head Office could allow her to source rubber may she to get a cty the price that the RPGsion is selling to them with an additional per kilo for transportation cost Give these squabbles the Head Office of SW held a meeting with both divisional heads and allowed the TP Go to purchase rubber from outside as long as the SW profit will be named For simply you may assume that the TP division bys be from the RP division in the same package designed for eidemala Page 14 15