ACM Ltd (ACML) has two divisions: Generation and Motors. Motors currently sells AC motors to appliance manufacturers for $625 per unit. Variable costs amount to $375 per unit, and demand for this motor currently exceeds the division's ability to supply the marketplace. Despite this situation, ACML's head office management is considering using the motor in off-road motorised equipment that would be manufactured by the Generation Division. The equipment has an anticipated selling price of $1,000 per unit and requires an additional $500 per unit of variable manufacturing costs. A transfer price of $575 per unit has been established for the motor. Head office management is keen to introduce the off-road motorised equipment given the recent popularity of off-roading. However, unless the transfer is made, this will not be possible because of the difficulty of obtaining the motor from the external market. Both divisions are in the process of recovering from financial problems, and neither division can afford any further losses. The company uses return on investment (ROI) to measure divisional performance and awards bonuses to divisional management based on their division's performance. Required 1. How might Generation's divisional management react to the $575 transfer price? Show calculations to support your answer. (3 marks) 2. Assume that a lower transfer price is desired. Should head office management lower the price or should the price be lowered by another means? Explain. (2 marks) 3. From a contribution margin perspective, does ACML benefit more if it sells the motors externally or transfers the motors to Genration? By how much