$($a$)$

Your answer is incorrect.

Calculate the minimum transfer price, based on Cullumber's transfer price policy. $($Round answer to $2$

decimal places, e$.$g$.125\mathrm{.}64.)$

Minimum Transfer Price

$Cullumber Electronics manufactures wheelchairs. It has two divisions$-$the Motors Division located in Canada and the Assembly

Division located in Japan. The Motors Division was originally set up to supply its motors to Cullumber's Japanese plant to complete

the wheelchairs. Over the years, the Motors Division experienced idle capacity and the senior management agreed that the Motors

Division could sell its motors to external customers. As a result, each division operates as an independent profit centre. The Motors

Division's revenue and cost information is as follows:

The Assembly Division can purchase a similar quality of motors in Japan for $$555$ each. The Canadian tax rate is $40\%$ and the Japanese

tax rate is $30\%.$

The Motors Division currently sells $10,725$ units to external customers and $3,575$ units to the Assembly Division.The Motors

Division uses the variable costing approach $($i$.$e$.$ variable cost $+$ variable cost $x40\%$ mark$-$up$)$ as the transfer price. One of the Motors

Division's local customers would like to increase their annual order by $1,300$ units. As a result, the Motors Division would like to

charge the Assembly Division $$649$ per unit for $3,575$ units to compensate for its loss of $1,300$ units of sale from the local customer.

The Assembly Division manager was not pleased about the increase in price, and argued that he is willing pay up to his local price of

$$555$ per unit.