Determine the transfer price for a product transferred from the Manufacturing Division to the Sales Division of a company. The following information is available:

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  • Variable manufacturing costs per unit: $50
  • Fixed manufacturing costs per unit: $20
  • External market price: $150
  • Desired ROI: 20% on total assets employed. Calculate the transfer price using both cost-based and market-based approaches. Present your calculations in a paragraph format, and discuss the advantages and disadvantages of each approach.