Explain why the transfer prices thus calculated are more likely to be favoured by the management of the divisions supplying the intermediate products rather than the management of the divisions receiving the intermediate products. (8 marks) (Total: 20 marks Company strategies Pay-off matrix Workers union strategies U U U U 55 53 +2.5 +2.7 +3.5 -0.2 + 2.0 +1.1 +0.8 +0.8 +1.4 +1.2 +1.5 +1.3 C +3.0 +1.0 +1.9 0 A positive sign represents a wage increase while a negative sign represents a wage decrease. Required: (i) Advise the management on the best strategies. (ii) The value of the game (6 marks) (2 marks) (c) Briefly explain the limitations of the use of fame theory in decision making. (6 marks) (Total: 20 marks) NUMBER FIVE (a) (b) State four objectives of a transfer pricing system. Transfer pricing of products between processes in a manufacturing company can be done at: 1. Cost or 2. Sales value at the point of transfer. Required: Discuss how each of the above methods could be used effectively in the operations of a responsibility accounting system. marks) Shadow prices may be used in the setting of transfer prices between divisions in a company, where the intermediate products being transferred are in short supply. Required: NUMBER FOUR (a) marks) (b) Identify and explain three types of decision making environments. (6 Batcom Limited (BCL) is a telecommunications company situated in Nyeri. Recently, the company was faced with a workers strike which necessitated a renegotiation of the workers' salaries through their union. The management with the help of a consultant has prepared the pay-off matrix shown below: