Hi I need help with this question.Thanks

Electronics manufactures motherboards for computers. The company is divided into twodivisions: manufacturing and programming. The manufacturing division makes theboard, and the programming division makes the adjustments required to meet thecustomer's specifications. The average total cost per unit of the boards in the manufacturing division is about $ 425

$425, and the average total cost per board incurred in the programming division is about $ 110

$110. The average selling price of the boards is $ 775

$775. The company is now operating atcapacity, and increasing the volume of production is not a feasible alternative.

In thepast, the managers of the two divisions have negotiated a transfer price. The average transfer price has been about $ 515

$515, resulting in the manufacturing division recognizing a profit of about $ 90

$90 per board and the programming division recognizing a profit of about $ 150

$150 per board. Each of the managers receives a bonus that is proportional to the profit reported by his or her division.

KarenBarton, the manager of the manufacturingdivision, has announced that she is no longer willing to supply boards to the programming division. SamDraper, the senior purchasing executive for KoalaElectronics, a computermanufacturer, has indicated that he is willing topurchase, at $ 727

$727 perunit, all the boards thatKaren's division can supply and is willing to sign along-term contract to that effect. Karen indicated that she offered the boards to the programming division at $ 715

$715 per board on the grounds that selling and distribution costs would be reduced by selling inside. NeilWilson, the manager of the programmingdivision, refused the offer on the grounds that the programming division would show a loss at this transfer price.

Neil has appealed to ShannonMcDonald, the generalmanager, arguing that Karen should be prohibited from selling outside. Neil has indicated that a preliminary investigation suggests that he cannot buy these boards for less than about $ 719

$719 outside.Therefore, allowing Karen to sell outside would effectively doomNeil's division.

Requirements

(a)

What transfer price would yourecommend? Why?

(b)

What recommendations do you have for the programmingdivision?