Insider Trading Company makes all types of office desks. It has two divisions.

The General Desk Division is currently producing and selling 10,000 desks per year. Its operating capacity is 15,000. The variable costs assigned to each desk are $300 and annual fixed costs of the division are $900,000. The General desk is selling its desk for $400 each.

The Executive Division wants to buy 5,000 desks at a transfer price of $250 each for its custom office design business. The Executive Division plans on selling the desks in the outside market for $420 after incurring additional costs of $100 per desk. The General Desk manager refused the transfer because the price is below variable cost. The Executive Division manager argues that the order should be accepted because it will lower the fixed cost per desk from $90 to $60 and will take the division to its full capacity, thereby causing operations to be at their most efficient level.

Required:

a. Should the request to transfer from the Executive Division be accepted by the General Desk Division? Why? Should General Division consider opportunity cost in the internal transfer and why?

b. From Insider Trading Company's perspective, should the transfer be made from the General Desk Division to the Executive Division? If you need further information, explain what is required?

c. If you are the company president, what will be your advice to both divisions? Justify your recommendations using numerical analysis.