7:08 PM Mon Mar 27 i eclass.yorku.ca ?45%lrv AP/ADMS3510 Weekly Case Assignment Ajax Consolidated Case Ajax Consolidated has several divisions; however, only two of its divisions transfer products to other divisions. The mining division renes toldine, which it transfers to the metals division where toldine is processed into an alloy and is sold to customers for $150 per unit. Ajax currently requires the mining division to transfer its total annual output of 400,000 units of toldine to the metals division at total (actual) manufacturing cost plus 10%. Unlimited quantities of toldine can be purchased and sold on the open market at $90 per unit. The mining division could sell all the toldine it produces at $90 per unit on the open market, but it would incur a variable selling cost of $5 per unit. To achieve a bonus, divisional managers need to exceed a ROI (return on investment dened as assets) of 10%. The mining division has assets of $75 million and the metals division has assets of $70 million. Brian Jones, the mining division's manager, is unhappy transferring the entire output of toldine to the metals division at 110% of cost. In a meeting with Ajax management, he said, \"Why should my division be required to sell toldine to the metals division at less than market price? For the year just ended in May, the contribution margin on metals was more than $19 million on sales of 400,000 units while the mining division's contribution was just over $5 million on the transfer of the same number of units. My division is subsidizing the protability of the metals division. We should be allowed to charge the market price for toldine when we transfer it to the metals division.\" The following is the detailed unit cost structure for both the mining and metals divisions for the scal year ended May 31, 2022: e Der Unit 7:09 PM Mon Mar 27 i eclass.yorku.ca ?@45%\\f' 20f2 External market price, unit of toldine = $90.00 Add'l cost per unit on external transfers = $5.00 Required: As a nancial analyst, prepare a report for Ajax's senior management which addresses the quantitative and qualitative aspects of the different pricing approaches the company could use to transfer toldine between the two divisions and the impact on divisional managers getting their annual bonus. Recommend an approach that would be most likely to elicit desirable management behavior at Ajax, allow both divisional management to achieve their bonus and thus benet the company overall. 7:08 PM Mon Mar 27 45% eclass.yorku.ca 1 of 2 The following is the detailed unit cost structure for both the mining and metals divisions for the fiscal year ended May 31, 2022: Cost per Unit Mining Metals Division Division Transfer price from mining division $66.00 Direct material $12.00 $6.00 Direct labor $16.00 $20.00 Manufacturing overhead $32.00 $25.00 + Total cost per unit $60.00 $117.00 * Manufacturing overhead in the mining division is 25 percent fixed and 75 percent variable. Manufacturing overhead in the metals division is 60 percent fixed and 40 percent variable. Additional information: Metals Division, external SP/unit = $150.00 Annual output of mining division = 400,000 units Current TP, markup over full mfg cost = 0 1