management accounting

Question 5: Transfer pricing (20 marks) N m SW recently received an order for 30,000 kg of white chocolate from another confection manufacturer, called Milky Way, which is another investment centre of QV Ltd. This internal order is to be delivered before Christmas 2020. Milky Way currently purchases the chocolate it needs from a company in China for $12/kg (including all freight and taxes), however, due to COVID-19, the supply chain has been disrupted. Another Australian supplier agrees to supply the same product to Milky Way at $15/kg. Requirement 1: The total production of SW for the second half of 2020 is expected to be 90,000 kg. Determine the lowest transfer price that SW can accept to supply 30,000kg of chocolate to Milky Way?. Will Milky Way accept this price? Advise the best solution for both parties and the whole organisation. (5 marks ) CO Requirement 2: Assume that the head quarter QV decided to go with option 2 in the capital investment project and invested in the advanced machine with a capacity O of 600,000 kg per year, to be brought into production in Jan 2021. And given the forecasted sale in the first quarter of 2021, given in question 2, is accurate. If Milky Way also has the intention to increase the order to 50,00kg in first quarter of 2021 to prepare for its international expansion. What will be the lowest price SW can offer the 50,000kg of chocolate to Milky Way? Will the deal go ahead? (5 marks) m Requirement 3: The Milky Way is currently producing a product which was featured by a famous Master Chef participant, the product has become so popular that the company decided to invest $1 million into a marketing campaign to support the international expansion of the product. The new supplier, who can supply white chocolate at $15/kg, is a new company in the chocolate market and QV is worried about the quality of the supplier's chocolate. QV wants to ensure the success of the campaign, and therefore wants SW to supply its high-quality chocolate to Milky Way at SW's production variable cost. (a) Advise whether QV's demand for SW to supply and sell to Milky Way at variable cost will be in the best interest of the Whole organisation? (5 marks) daeting Question 4 Performance measures Question 5 Transfer price +