$($b$)$ Nykee Shoe Compan two divisions. Production and Marketing. Production manufactures Nykee shoes, which it sells to both the Marketing Division and to other retailers $($the latter under a different brand name$).$ Marketing operates several small shoe stores in shopping centers that sell both Nykee and other brands. Relevant facts for Production, which is operating far below its capacity, follow:

Sales price to outsiders

$28\mathrm{.}50$ per pair

Variable cost to produce

$18\mathrm{.}00$ per pair

Food costs

$100,000$ per month

The following data pertain to the sale of Nykeo shoes by Marketing, which is operating far below its capacity:

Sales price

$$40$ per pair

Variable marketing costs

$1$ per pair

The company's variable manufacturing and marketing costs are differential to this decision, but foed manufacturing and marketing costs are not.

$($i$)$ What is the minimum price that the Marketing Division can charge for the shoes and still cover the company's differential manufacturing and marketing costs?

$($i$)$ What is the appropriate transfer price for thls decision?

$($ii$)$ What effect would a transfer price set at $$28\mathrm{.}50$ have on the minimum price set by the Marketing manager?

$($iv$)$ How would your answer to $($ii$)$ change if the Production Division were operating at full capacity?