Foleo Accessories has 2 manufacturing processes required to produce the car cradles, undertaken by the Electronics and Plastics departments. These departments are both currently run as profit centres, so they are responsible for both their revenues and costs. The Electronics department builds the circuitry and inner workings of the cradle, which consumes $8 in variable costs per unit. The finished goods of the Electronics department are then passed through to the Plastics department, who incurs an additional $4 in variable costs per unit to mould the cradle, fit the electronics and package the finished product. Once completed, the Plastics department typically sells the car cradle to its end-user customers and other retailers for $24 per cradle. The Electronics department can also sell their products to an outside customer for $15 per unit. This external sale incurs an additional variable cost of $1 per unit for packaging.

1. Assume that there is spare capacity in the Electronics department. Use the general rule to calculate the transfer price for its product.

2. Assume that there is no spare capacity in the Electronics department. Use the general rule to calculate the transfer price for its product.