Question
Two of Dan Ventures units are Farms and Poultry . They are both profit centres. Farms supplies its partly processed grains and legumes to the
Two of Dan Ventures units are Farms and Poultry. They are both profit centres. Farms supplies its partly processed grains and legumes to the Poultry unit. The Poultry unit adds value to the harvests and sells poultry feed on the market for GHS87.50 per bag.
In a meeting of the officers of the two units, two transfer prices were being considered: GHS50.00 or GHS62.50. Using the budgeted data below, you are required to calculate the budgeted annual profit of each of the two units and that of the Ventures assuming the Farms to the Poultry used these two prices to supply the harvests.
| Farms | Poultry |
Cost of materials | GHC20 per unit | GHC5 per unit |
Annual fixed costs | GHS150,000 | GHS75,000 |
Other variable costs | GHC5 per unit | GHC7.5 per unit |
|
|
|
Number of units transferred/sold | 10,000 | 10,000 |
Draw reasonable conclusions after the computations.
(b)
Assume that the Farms can sell its harvests both on the open market and to the Poultry unit internally at GHS112.50 per bag. This can be done by the Farms only after incurring GHS75 marginal cost per bag. There is spare capacity to do this successfully.
On the other hand, the Poultry unit turns the Farms supplies to poultry feed, incurring a marginal cost of GHS137.50 per bag which it sells at GHS300 per bag on the external market but not without GHS7.50 variable distribution cost per bag.
You are required to determine the price acceptable to the Farms. Justify your answer. (5 marks)
QUESTION FOUR
- Describe your organization and what it does in two sentences.
- Recommend ten key non-financial performance indicators (NFPIs) appropriate for the organization.
- In one sentence each, proffer why each indicator is crucial from the standpoint of your customers or clients.
- In one sentence each, predict what could happen to your client base if each NFPI is abandoned.
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