The Question on Transfer Pricing.

\f'1!) (C) (d) (c) [ is) Describe any three {3} transfer pricing possibilities or methods that could he used in Lia Ltd. {9 marks] Irosef Division was granted autonomy to set the transfer price, what will he the likely range of the transfer prices? Comment on whether the internal transfer will likely take place at this transfer price. {4 marks] Compute the range of transfer prices of material Al that will he likely to be accepted by Merl Division from the internal transfers from Josef Division aftner Jll autonomy is granted on decision making is granted? {2 marks] Advise the management on the pros and cons of granting full autonomy to the two divisions. Include in your answers, examples of any four (4) decisions. {3 marks] Calculate the estimated prots of each of the two divisions and the total for Lia Ltd if Josef Division sells only to external customers without making any internal transfers. Meri Division purchases all material Al from the external supplier. Assess and comment on the results of the two divisions and the overall total of Lia Ltd {3 marks] As a management accountant, prepare a report to the management to advise on the best course of action for the whole company, Lia Ltd on the transfer pricing policy. In the report, recommend the transfer prices that will maximise the prots of Lia Ltd, justifying the reasons for your recommendations. To support your answers, relevant calculations should he made, clearly indicating the transfer priees and the effect on the prots of the two divisions and Lia Ltd as a whole. (11 marks]