QUESTION ONE Thandy Limited, a Zambian based company/ has two subsidiaries in Malawi and Mozambique. The subsidiary in Malawi produces specialist components and transfers them to Mozambique were they are assembled, packed and sold to the outside customers. - The production and sales volume may each be assumed to be 800000 units per year no matter where assembly and sales take place. - Variable manufacturing costs in Malawi are K32 per unit and fixed costs (for normal range of production), K3.6 million. - Additional assembly costs in Mozambique are K18 per unit and fixed costs K1,400,000. - The unit sales price in Mozambique is K140 to external customers. Assuming a transfer price between the divisions of K100 per unit, calculate: (Cost and price data in all countries is shown in Zambian Kwacha). (a) (i) The total profit per year made by the company overall. (ii) The profit per year made by each division, [10 marks] (b) Define decentralization and briefly discuss its merits and demerits [10 marks] (c) Briefly discuss any five possible objectives of transfer pricing [5 marks] QUESTION ONE Thandy Limited, a Zambian based company/ has two subsidiaries in Malawi and Mozambique. The subsidiary in Malawi produces specialist components and transfers them to Mozambique were they are assembled, packed and sold to the outside customers. - The production and sales volume may each be assumed to be 800000 units per year no matter where assembly and sales take place. - Variable manufacturing costs in Malawi are K32 per unit and fixed costs (for normal range of production), K3.6 million. - Additional assembly costs in Mozambique are K18 per unit and fixed costs K1,400,000. - The unit sales price in Mozambique is K140 to external customers. Assuming a transfer price between the divisions of K100 per unit, calculate: (Cost and price data in all countries is shown in Zambian Kwacha). (a) (i) The total profit per year made by the company overall. (ii) The profit per year made by each division, [10 marks] (b) Define decentralization and briefly discuss its merits and demerits [10 marks] (c) Briefly discuss any five possible objectives of transfer pricing [5 marks]