Maple Rose Leather is a medium size business that specializes in the production of leather and the design and production of leather wallets, notebook covers and bags. The company has two divisions: the Leather Division and the Accessories Division. The Leather Division can transfer the leather to the Accessories Division or it can sell it to external clients. The Leather Division currently produces and sells 262,500 sq. ft (square feet) per year to external clients at an average price of $28.50 per sq.ft. Variable costs of production average $17 and fixed costs of $11.50 per sq. ft. The Leather Division incurs $3.20 of variable selling costs on external sales. Fixed costs are based on the practical capacity of the plant which 315,000 sq. ft per year. The Accessories Division is interested in acquiring up to 52,500 sq. ft per year. Required: 1. From the standpoint of Maple Rose Leather, should the leather be transferred? Determine the financial benefit or cost of your recommendation. (3 marks) 2. Using the general guidelines for transfer pricing, what is the minimum transfer price the Leather Division should accept? (2 marks) 3. What is the range of acceptable transfer prices? (3 marks) 4. Now assume that demand in the external market for the components is expected to increase by 9%. The Accessories Division has negotiated with an external supplier to supply 52,500 sq.ft. of leather at a price of $25.50 per element. If the Accessories Division reduces its volume below the 52,500 sq. ft, it must pay $35.50 per sq. ft. What is the optimum sourcing arrangement for the company? (12 marks)