Cycle Ltd, produces bicycles in two divisions. Division Frame produces the frame for the bicycle while Division Assemble then add components to the frame to produce a complete product that is sold in the market. The market exists for both the frame and completed bicycle. In terms of responsibility accounting, each division is recognised as a profit centre. The transfer price of the frame has been set using the average long-term market price. The following information has been extracted for each division: The manager of Division Assembly has produced the following calculations: \begin{tabular}{|l|l|c|c|} \hline \multicolumn{2}{l}{ Requirement } & \multicolumn{2}{c|}{ Mark } \\ \cline { 3 - 4 } 3.1 & Sub-total & Total \\ \hline AssumingthereisnoexcesscapacityinDivisionFrame,adviseifanytransfersshouldbemadebetweenthetwodivisionsandalsoifthemarketpriceisthecorrecttransferpricethatensuresgoalcongruency.Youranswershouldbesupportedbyrelevantcalculations. & 8 & 8 \\ \hline NowassumethattheDivisionFramehasacapacityof1000unitspermonthforthisproductandhasanexternaldemandof800units.Wouldyouadvisethe200unitstobetransfertotheDivisionAssembly?Whatpricewouldyouadvisethistransferisdoneat?YoumayalsoassumethatDivisionFramewillcontinuetousethemarketpriceofN$2000regardlessofwhetherthereisexcesscapacityornot. & 4 & 12 \\ \hline 3.3 & IfforinstanceDivisionFramequotedatransferpriceofN$1500forupto200units,calculatethecontributiontothecompanyasawholeifthetransferweremade.AsamanagerinDivisionAssembly,wouldyouhaveacceptedthistransferpriceofN$1500? & 4 \\ \hline \end{tabular}