Laris Manufacturing Company has two departments: Zaza and Zizi. Zaza Department produces electric motors, 20 per cent of which are sold to the Zizi Department. The remainder are sold to outside customers. Laris Manufacturing Company regards both departments as investment centres and allows department manager to choose their sources of sale and supply. Corporate policy requires that all interdepartmental sales and purchases be made at a transfer price based on standard variable cost. Zaza Department's estimated sales and standard cost data for the year ending 31 December, based on capacity of 100,000 units, are as follows: Kepada Jabatan Zizi Kepada pelanggan luar To Zizi Department To outside customers Jualan/Sales Kos Berubah/Variable costs Kos tetap/Fixed costs Untung Kasar/Gross margin Jualan seunit/Unit sales RM 450,000 (450,000) (150,000) RM (150,000) 20,000 unit RM 4,000,000 (1,800,000) (600,000) RM 1,600,000 80,000 unit Zaza has an opportunity to sell the 20,000 units that it currently sells to Zizi to a new outside customer at a price of RM37.50 per unit. Zizi can purchase its requirements from an outside supplier at a price of RM42.50 per unit. Assuming that Zaza Department desires to maximise its profit, should Zaza take on the new customer and drop its sales to Zizi? Explain. (4 markah/marks) Assume, instead, that Laris Manufacturing Company permits department managers to negotiate the transfer price. The managers agree on a tentative transfer price of RM37.50 per unit, to be reduced based on an equal sharing of the additional gross margin to Zaza resulting from the sale to Zizi of 20,000 motors at RM37.50 per unit. What would be the actual transfer price? (4 markah/marks)