55 56 57 Question 2 - 10 marks 58 59 Q2 Titanium Castings Ltd has a Castings Division that does casting work of various types. The company's 60 Machine Products Division has asked the Castings Division to provide it with 22,000 special castings each year on a continuing basis. The special castings would require $10 per unit in variable production costs. The Machine 62 Products Dision has a bid from an outside supplier of $30 per unit for the castines 61 63 66 65 64 In order to have time and space to produce the special castings, the Castings Division would have to cut back 65 production of another casting the RX100, which it presently is producing The RX100 sells for $34 per unit, and requires $14 per unit in vanable production costs. Boxing and shupping costs of the RX100 are $3 per unit 67 Boxing and shipping costs for the new special castings would be $1 per unit. The company is now producing and selline 100,000 units of the RX100 castings each year. Production and sales of this casting 69 would drop by 22 if the new casting is produced 70 71 Required: 72 73 a) Calculate the transfer price of the Castings Division if the transfer of 22.000 special castings Show anylall workings in here: was to take place between the two divisions. (5 marks) 75 76 Transfer price of Castings Division 77 74 78 b) What is the transfer price of the Machine Products Divison? (1 mark) 79 80 Transfer price of Machine Products Division 81 82 c) What is the transfer price range between the two divisid 83 84 85 86 d) Do you think this transfer shoul take place? (1 mark) 87 88 89 e Brietly explain why you said yes or no in (d) above (2 marks) 90 91 92 33 4