1.2)Sweet Threads Ltd. operates as 2 distinct Divisions. The first is the Sweater Division that manufactures unisex knitted sweaters. The second is the Buttons Division, it makes brass buttons. The Sweater Division uses brass buttons in its sweaters and can purchase its buttons from outside suppliers for $1.00 each. It typically has to buy 600 per month. The Buttons Division has manufactuing capacity capable of producing 2,500 buttons per month. The Variable cost of button produciton is $.40 and the division can regularly sell them to third party customers at $1.20 each.

i) If the Button Division is operating at full capacity and selling eveything it produces to outisde third party customers, what is the acceptable range of Transfer Pricing that the two divisions would consider entering into?

ii) If the Button Division is operating and selling at 80% of capacity, what is the acceptable range of Transfer Pricing that the two divisions would consider entering into?

iii) Assuming that the Buttons division could save $.25 cents in commission and shipping costs for every button transferred to the Sweater Division instead of selling to third parties, how would your answers to (i) and (ii) above change?

iv) Suggest two different types of Preventive costs that the Sweater Division might incur to ensure that the Quality of the final product is free from defects. Be specific.

1.4)Edith's Electronics Inc. is a consumer electronics store similar to Best Buy. The company owns 2 stores that they have set up as separate Divisions: The Whitby store and the Ajax store. The Whitby store generated 50% more in sales than the Ajax store did in November of 2020. The Ajax store sales that month were $60,000. The commission is paid at each store based upon 3% of Sales. All advertising is handled at head office in Toronto. The company has entered into a billboard campaign agreement and will be paying $2,000 per month throughout 2020 and 2021. Rent at Whitby store is $5,000/month but the lease agreement also requires an additional payment of 1% of monthly sales. Rent at the Ajax store is simply $3,000/month. The Store Manager at Whitby is paid $60,000 a year. The Ajax Store Manager is paid $4,000 per month. The Cost of Goods Sold during the month at Whitby was $30,000 and $20,000 at Ajax. The cost of annual Insurance is $25,200, $1,200 for head office premises and the remainder split evenly between the 2 stores. The President of the Company makes $120,000 per year.

i) Prepare a Segmented Income Statement for the Company and its Divisions using the Contribution Margin format.

ii) If the Company was planning to open a new store in Pickering in 2021, how would this impact the Traceable Fixed Costs at the Whitby and Ajax stores? Explain your answer