Executives summary of following 1. Issues - low quality and defective components from El manufacturing ( higher direct material and labour cost)- Increase frequency of rework and spoilage, reduced contribution margin and net operating income - increase overall control costs - Decrease in costumers to satisfaction and reduce sales - reduce product quality satisfaction - ROI dynamics( lagging sales, negative profit)- Actual variable cost increase, actual expenses increase 2. Recommendations - Investigate the defective components issues - Analyze cost of quality - Customer satisfaction improvement -transfer pricing agreement - Evaluate EL manufacturing ROI- long term strategy for sung-communication and collaboration - continuous monitoring 3. Implementation

negotiating with EL Manufacturing. Customer Satisfaction Improvement: Efforts should be made to address the decline in customer satisfaction. This may involve ensuring better product quality, timely deliveries, and better customer support. GeoBab should consider surveying its customers for their feedback. Transfer Pricing Agreement: The transfer pricing agreement between EL Manufacturing and Sung should be revisited. A compromise may be reached to ensure that EL earns a fair ROI without burdening Sung with excessively high component costs. This could involve benchmarking against industry standards. Evaluate EL Manufacturing's ROI: GeoBab should conduct a thorough analysis of EL Manufacturing's request for a higher ROI. If other independent firms are earning a 25 percent ROI, GeoBab should assess whether EL Manufacturing's request is reasonable and competitive. . Long-Term Strategy for Sung: A long-term strategy for Sung should be developed, considering market conditions, competition, and changing customer preferences. This may involve diversifying product lines