Assume NovaTech Innovations is a technology company

that produces a variety of $$smart$$ household appliances,

like refrigerators and dishwashers that connect to the

internet. NovaTech has a decentralized structure. The

smart tech division produces the technology that can be

embedded in various household appliances. This

technology can be sold to external producers of

appliances $($like GE or Whirlpool$)$ or can be transferred

internally to NovaTech$$s own appliance divisions.

Similarly, NovaTech$$s appliance divisions can buy similar

smart tech from external supplier for $$15$ per unit. Use

the following data to calculate the effects of an internal

transfer of technology using a

$($a$)$ market$-$based,

$($b$)$ cost$-$based and

$($c$)$ hybrid transfer price.

NovaTech sells its smart technology to external

customers for $$18$ per unit.

NovaTech$$s appliance division$$s production budget

plans for $750,000$ appliances sold per year.

NovaTech$$s smart tech division produces $1,500,000$

smart technology devices per year.

The smart tech division has $$50,000$ in fixed costs

and variable costs average $$7\mathrm{.}00$ per unit.

The appliance division sells appliances for $$2500.$

Fixed manufacturing costs are $$75,000.$ The cost of

the smart technology will vary based on the agreed

upon price. Other variable costs amount to $$150$ per

unit. Transfer Price is $$10.$ What is Operating Income at Market Price for Appliance department and Operating INcome of rhte smart technology division.