Question $1$

$(20$ marks$)$

Windhoek Enterprise wants to introduce a new product in the market. Findings from its market analysis suggest that at a selling price of N$$2100$ per unit, demand is expected to be around $2400$ units. For every N$$20$ price increase, demand is projected to fall by $400$ units, while a N$$20$ price reduction is expected to boost demand by $200$ units. The unit's variable cost is estimated at $N$$$60.$ There are no dedicated fixed costs for the product; however, general fixed overheads are applied at an allocation rate of N$$16$ per unit.

Note: If $P=a-bx,$ then $MR=a-2bx,$ where:

P $=$ price charged

$a=$ is a constant

b $=$ elasticity of demand

$x=$ units sold

$\backslash$table$[[$REQUIRED$,$Marks$],[1\mathrm{.}1,$Calculate the optimum price that should be charged for the new product,$11],[1\mathrm{.}2,$At the price calculated above, determine the amount of contribution and profit that will be earned.,$5],[1\mathrm{.}3,$Identify four $(4)$ external factors the company should consider when setting the price of the new product,$4],[$Total for question $1,20]]$

$(15$ marks$)$

Tara Limited operating under a divisional structure, consists of two units, Division A and Division B$.$ Division A is responsible for the initial processing of Product X $,$ with a variable production cost of N$$6$ per unit, and does not incur any additional fixed or opportunity costs. Division B carries out the finishing stage of production, incurring a variable cost of N$$9$ per unit and fixed costs amounting to $N$$$300000.$ The estimated market demand for the completed product varies according to the selling price, as outlined below:

$\backslash$table$[[$Selling price per unit,Quantity$],[$N$$,$Units$],[75,6000],[65,8000],[50,13000],[42,16000],[38,18000]]$

Page $5$ of $8$

$\backslash$table$[[$REQUIRED$,$Marks$],[\backslash$table$[[-2$A$],[-.]],$Determine a range of transfer prices can enable the two divisions to want to trade with each other. Show all your workings,$12],[,$In an event that two divisions cannot agree to a transfer price, name any three $(3)$ alternatives that can be suggested to ensure goal congruency,$3],[$Tots$,,15]]$