kindly find attached question onKanorer Enterprises Ltd has two divisions Mugaa and Gwashati. Mugaa division manufactures an intermediate product for which there is no external market. Gwashati division incorporates the intermediate product into a final product, which it sells. One unit of the intermediate product is used in the production of the final product

QUESTION ONE Kanorer Enterprises Ltd has two divisions Mugaa and Gwashati. Mugaa division manufactures an intermediate product for which there is no external market. Gwashati division incorporates the intermediate product into a final product, which it sells. One unit of the intermediate product is used in the production of the final product. The expected units of the final product which Gwashati division estimates it can sell at various selling prices are as follows: Net selling Price Sh. 100 90 80 70 60 50 Quantity sold Units 1000 2000 3000 4000 5000 6000 The variable and fixed costs of each division are as follows: Mugaa Gwashati Sh. Sh. Variable cost pr unit 11 7 Fixed cost per annum 60,000 90,000 The transfer price is Sh.35 for the intermediate product, and is determined on a full cost-plus basis. Required: Which selling prices maximize the profits of Gwashati division and the company as a whole? Comment on why the selling price (which is selected by the company) is not selected by Gwashati division. (3 marks) It has been argued that full cost is an inappropriate basis for selling transfer prices. Outline the objections which can be raised against this basis