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5 points Dairy Co. is a manufacturer of a range of dairy products. Two of the firm's departments include the Protein Powder and the Yoghurt Departments. The Yoghurt Department requires protein powder for their high protein line which sells for $9.00 per 1 kilogram tub. Each yoghurt tub requires 100 grams of protein powder. Beyond supplying the Yoghurt Department, the Protein Powder Department also sells protein powder to external customers. The market price for protein power is $2.00 per 100 gram sachet. Protein Powder Department (price per Yoghurt Department (price to 1 kg 100 gram sachet) tub) $1.00 $4.10 $0.10 $0.50 $0.75 $0.15 $0.25 $1.40 $5.60 Direct material cost Direct labour cost Variable overhead cost Fixed overhead cost Total manufacturing cost Does not include the cost of protein powder. $0.15 Required 1. Identify and discuss one weakness and one strength associated with the use of transfer prices based on cost-plus pricing in this situation. Identify and discuss a method of transfer pricing that is more appropriate than cost-plus pricing (3 Marks) 2. Assume that the transfer price for protein powder was set through negotiation and this resulted in the establishment of a transfer price of $1.10 per 100 gram sachet. Discuss how this might be the case and discuss one possible risk associated with this price. (2 Marks) 5 points Dairy Co. is a manufacturer of a range of dairy products. Two of the firm's departments include the Protein Powder and the Yoghurt Departments. The Yoghurt Department requires protein powder for their high protein line which sells for $9.00 per 1 kilogram tub. Each yoghurt tub requires 100 grams of protein powder. Beyond supplying the Yoghurt Department, the Protein Powder Department also sells protein powder to external customers. The market price for protein power is $2.00 per 100 gram sachet. Protein Powder Department (price per Yoghurt Department (price to 1 kg 100 gram sachet) tub) $1.00 $4.10 $0.10 $0.50 $0.75 $0.15 $0.25 $1.40 $5.60 Direct material cost Direct labour cost Variable overhead cost Fixed overhead cost Total manufacturing cost Does not include the cost of protein powder. $0.15 Required 1. Identify and discuss one weakness and one strength associated with the use of transfer prices based on cost-plus pricing in this situation. Identify and discuss a method of transfer pricing that is more appropriate than cost-plus pricing (3 Marks) 2. Assume that the transfer price for protein powder was set through negotiation and this resulted in the establishment of a transfer price of $1.10 per 100 gram sachet. Discuss how this might be the case and discuss one possible risk associated with this price. (2 Marks)