Neptune Has 3 Division In Windhoek Operation As Profit Centres

- Harvesting Operates A Fleet Of 20 Trawling Vessels
- Processing The Raw Fish Into Finished Cuts
- Marketing: Packages Fish In 2 Kg Packets That They Sell To Wholesalers Distributors At N$30 Each .from 1000 Kg Fish Caught Are Selling 400 Packages.

The Variable And Fixed Cost Are Summarised As Follows

HARVESTING DIVISION | PROCESSING DIVISION | MARKETING DIVISION | |

VARIABLE COST /KG | N$0.50 | N$ 2 | N$0.75 |

FIXED COST/ KG | N$ 1 | N$1.50 | N$1.75 |

FULL COST kg | N$1.50 | N$3.50 | N$2.50 |

Variable Cost Is Variable With Respect To :

- Harvesting Division: kilograms Raw Fish
- Processing Division: Kilogram Raw Fish
- Marketing Division: kilogram Fish Marketed

The Fixed Cost Per Unit Kg Is Based On The Budgeted Annual Kg Of Fish Produced Proccesed And Marketed. The Transfer Prices Of The Processing And Marketing Division Are Based On Raw Fish. The Harvesting Division Can Sell Fish To Other Partys At N$4.50 /kilogram And The Processing Division At N$10/ Kg • The Processing Division Buys Fish From The Harvesting Division From And Then Sells It To The Marketing Division. • The Marketing Division Can Accommodate 1200kg Of Fish Per Day • The Marketing Division Now Operates At a 1000 Kg Per Day **Requirement**

**A)** Calculate The Net profit In Columnar Format For Different Divisions Applying for The Internal Transfers at Variable Cost And Internal Transfer At Market Price **14 Marks**

**B)** Determine The Neptune Operating Income Per 1000 Kg Of Fish Under The Internal Transfer At Variable Cost And Internal Transfers At Market Price **6 Marks**

**C)** Define the Transfer Price And Outline Any 3 Purpose Of Transfer Pricing **5 Marks**

## 1 Answer