A transfer pricing system was introduced, as PowerSD requires solar panels from SPanelD. Matla$$s

management implemented a transfer price equal to the SPanelD$$s external selling price less a $7,5\%$

discount. This has led to unhappiness and numerous debates between the Divisions.

PowerSD will save delivery costs amounting to R$10$ per panel and ordering cost of R$72$per panel by

receiving the panels from SPanelD rather than buying it from their external supplier at R$1890.$

It is expected that SPanelD will provide PowerSD with $650$ solar panels per month. SPanelD has the

capacity to manufacture $16000$ panels per month and has an external demand of $9002$panels per month.

You obtained the following budget information about one solar panel from SPanelD:

Details R per panel

External selling price $2000$

Direct material $500$

Direct labour $1000$

Variable manufacturing overheads $80$

Applied fixed manufacturing overheads $65$

External variable selling costs

$4,1\%$ of the selling price $?$

REQUIRED: PART D

$($D $-$ a$)$ Briefly discuss five business risks Matla should have considered before acquiring

Parhelium $($Pty$)$ Ltd$.$

$(10)$

$($D $-$ b$)$ Calculate the minimum transfer price for one solar panel at which SPanelD would

be willing to transfer the required panels to PowerSD.

$(12)$

$($D $-$ c$)$ Calculate the maximum transfer price for one solar panel that PowerSD would be

willing to pay for the required transfer from SPanelD.

$(2)$

$($D $-$ d$)$ Briefly discuss the possible implications of both the current transfer price and the

transfer prices as determined in $($D$-$b$)$ and $($D$-$c$)$ above on Matla$$s performance

measurement system.