A K company Ltd is a divisionalised enterprise that manufactures special equipment for the construction industry. Division A makes one of the basic spikron which is used by Division B in the manufacturing of akroid scrapper which is then sold as a final product. Division B then absorbs 75% of the total output of Division A. With the spikron as other application, Division A sends its 25% of its total output to outside firms. The annual output of the spikron is Ghc 16,000. The spikron is transferred out at Ghc 250 to Division B. But it is sold to outside firm at Ghc 400. The following cost is associated with the spikron produced in Division A. Variable Cost @ Ghc 300 per unit Ghc 4,800,000 Fixed cost Ghc 200,000 Total cost Ghc 5,000,000 A Ghanaian firm makes a similar product of the spikron which could be adopted for integration and usage by other Ghanaian and African firms. The end product is similar to the akroid scrapper and has offered to sell its version of the akroid scrapper to Division B with the adopted product at a cost of Ghc 320 per unit. The manager of Division B is interested in buying the Ghanaian product because it will substantially reduced cost. The C E O of the company contacted the marketing manager in Division A. The marketing manager argued that he will not be in the position to expand his sales of spikron to outside firms and that the profitability of his division will be seriously affected with implications which will affect the overall performance of his division. REQUIRED. A.Discuss the implication of the Ghanaian firms offer on both Division A and B. B.Discuss the implications of the Ghanaian firms offer from the point of view of the Akroid production. C.Using principles of Transfer Pricing Research, discuss the profit implication of Division A. D.Define Transfer pricing and discuss its implications to strategic marketing practice as indicated in the case study by the marketing manager of division A.; A K company Ltd is a divisionalised enterprise that manufactures special equipment for the construction industry. Division A makes one of the basic spikron which is used by Division B in the manufacturing of akroid scrapper which is then sold as a final product. Division B then absorbs 75% of the total output of Division A. With the spikron as other application, Division A sends its 25% of its total output to outside firms. The annual output of the spikron is Ghc 16,000. The spikron is transferred out at Ghc 250 to Division B. But it is sold to outside firm at Ghc 400. The following cost is associated with the spikron produced in Division A. Variable Cost @ Ghc 300 per unit Ghc 4,800,000 Fixed cost Ghc 200,000 Total cost Ghc 5,000,000 A Ghanaian firm makes a similar product of the spikron which could be adopted for integration and usage by other Ghanaian and African firms. The end product is similar to the akroid scrapper and has offered to sell its version of the akroid scrapper to Division B with the adopted product at a cost of Ghc 320 per unit. The manager of Division B is interested in buying the Ghanaian product because it will substantially reduced cost. The C E O of the company contacted the marketing manager in Division A. The marketing manager argued that he will not be in the position to expand his sales of spikron to outside firms and that the profitability of his division will be seriously affected with implications which will affect the overall performance of his division. REQUIRED. A.Discuss the implication of the Ghanaian firms offer on both Division A and B. B.Discuss the implications of the Ghanaian firms offer from the point of view of the Akroid production. C.Using principles of Transfer Pricing Research, discuss the profit implication of Division A. D.Define Transfer pricing and discuss its implications to strategic marketing practice as indicated in the case study by the marketing manager of division A.
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