The India Company manufactures handmade Persian rugs. Within the India Company, there are two divisions: the Dye Division makes dyes and colours the wool, while the Weaving Division hand weaves each rug. The dyed wool can be sold to outside companies for a price of \($20\) per kilogram. The finished rugs sell for \($1,000\) each, and 10 kg of wool are used to make each rug. The following information relates to operations of the India Company for 2011:

a. Calculate the operating income for each division and for the company as a whole. Use market value as the transfer price.

b. If a special order of 20,000 kg of dyed wool was received from an external party during the year at a price of \($15\) per kg, should the company accept this order?

c. What other factors need to be considered, outside of profits?

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Number of rugs sold in 2011 2,000 Wool sold to external parties 30,000 kg Wool sold internally to Weaving Division 20,000 kg Capacity of Dye Division 60,000 kg Dye Division: Direct material costs Dye Division: Direct labour costs $4 per kg $1 per kg