Suppose we are given the following information for Dawson limited,a three divisional company for the period ended 31 July 2020

A.

Divisional Transfer

the transfer pricing method used for the transfer of an immediate product between two divisions in a group has been agreed at standard cost plus 25% profit mark-up.

the transfer price may be altered after taking into considerations the planning and operational variances analysis at the transferor division[transfer or division]

discuss the acceptability of this method to the transferor and transferee divisions.

B.

Sourthen division has an external market for its product [super],which fully utilizes its production capacity.

explain the conditions under which Southen division should be willing to transfer product [super to Northen division of the same group at a price which is less than its existing

C.

An intermediate product which is converted in southern division,Northen division and eastern division of a group is available in limited quantities from other divisions within the group and from an external source.the total available quantity of the intermediate products sufficient to satisfy demand.

explain the procedure which should lead to the transfer pricing and deployment policy resulting in group profit maximization.[25 marks]