Please answer this

Transfer pricing.Issues with transfer pricing are discussed on page 4 paragraphs 1 and 2 and illustrated in exhibit 5.

What are the pros and cons of using each of the following transfer pricing options?

i. Variable cost

ii. Variable and fixed cost

iii. Total cost plus 5%

Explain using quantitative and qualitative analysis using data from the case where ice cream was transferred between France and Spain

Compagnie du Froid, S.A. Exhibit 52009 Ice cream Transfers between France and Spain Unfortunately, 2009 had been problematic for several reasons. (Exhibit 4 shows the performance of the Spanish region.) New machines, similar to the ones purchased in France, were bought early in the year to increase efficiency, but they did not perform adequately until late August. Technicians from the supplier had to spend several weeks adjusting the machines. Because of these problems, Andres had run out of capacity several times during the year and he had been forced to import product from the French division. This was the first time that Compagnie du Froid had transferred sales between regions and Jacques had decided to set the transfer price at full cost plus a 5\% profit for the manufacturer (see Exhibit 5). There was some argument about the policy. Andres was not happy about it because he said that it made his division look bad, but he accepted it as a temporary solution. In addition, the Spanish division had been forced to absorb the expenses of having people travel to France to help fit Spanish containers and packaging to the French production line