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please show all your workings, thanks a lot. (b) Division WT considers it could sell extra crates if it reduced the price per crate to
please show all your workings, thanks a lot.
(b) Division WT considers it could sell extra crates if it reduced the price per crate to 7.50 for all sales to food wholesalers. Division WT knows that Division ST is not working at capacity. Division WT's current bottling capacity is 500,000 litres but relations with customers indicate that the division could sell at least 1,000,000 litres. WT could extend the bottling capacity by hiring additional capacity at a cost of 1 per crate and could if necessary buy additional syrup from other supplies at the market price of 0.13 per litre. Under each of the alternatives below, calculate the effect on divisional and company profits if Division WT were allowed to buy from other suppliers but gave first preference to Division ST. If necessary Division WT would approach head office to have the restriction of only buying from Division ST revoked. Show the revenue, costs and net income for each division and the company as whole, relating to the three options available to Division WT if the manager wishes to expand: i) market price at 0.15, and divisions trading with each other WT expands to 25,000 cases. ii) market price at 0.13 and divisions trading with each other WT expands to 50,000 cases, buying all possible from ST and the rest from outside suppliers iii) market price is 0.13 and Division WT wants to expand to 50,00 cases and decides to buy entirely from other suppliers. (8marks) c) Discuss the impact on Divisions of the results you have calculated in part (b). (4 marks) d) Recommend a transfer price system to be adopted by the company which would provide greater incentive to increase company profits. Indicate any problems which your recommendation might encounterStep by Step Solution
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