Motor Supply Ltd (MSL) has two manufacturing divisions: Perth division and Brisbane division. The Perth division produces motors which are sold to the Brisbane division and to outside customers. The Brisbane division can purchase its requirement from an outside supplier. Assume the following information relative to the two divisions:

	Case
	1	2	3	4
Perth Division
Capacity in units	90,000	90,000	90,000	90,000
Units sold to outside customers	90,000	70,000	87,000	80,000
Selling price to outside customers (per unit)	$35	$35	$35	-
Variable manufacturing costs per unit	$20	$20	$25	$25
Variable selling costs to outside customers (per unit)	$2	$2	$2	-
Fixed costs (per unit)	$6	$6	$6	$6
Brisbane division
Number of units needed	6000	6000	6000	6000
Purchase price now being paid to an outside supplier per unit (per motor)	$34	$34	$30	-
Further processing variable cost per unit	$25	$25	$25	$25
Further processing fixed cost per unit	$5	$5	$5	$5
Final product selling price per unit	$90	$90	$90	$90

Required: Answer each of the following independent questions. (Total Marks: 15)

(I) Refer to case 1 shown in the table above. Explain the likely reaction of divisional managers towards the transfer. Show the computation of both maximum and minimum transfer prices. (2 marks)

(ii) Refer to case 2 shown in the table above. Explain the likely reaction of divisional managers towards the transfer. Show the computation of both maximum and minimum transfer prices. (2 marks)

(iii)Refer to case 3 shown in the table above. Explain the likely reaction of divisional managers towards the transfer. Show the computation of both maximum and minimum transfer prices. (2.5 marks)

(iv)Refer to case 4 shown in the table above. Explain the likely reaction of divisional managers towards the transfer. Show the computation of both maximum and minimum transfer prices. (2.5 marks)

(v) Refer to case 2 shown in the table above. If the agreed transfer price is $25, calculate the total incremental profit resulting from the internal transfer for each division. Show the computation. (3 marks)

(vi)Refer to case 3 shown in the table above. Recommend whether the transfer is in the best interest of Motor Supply Ltd. Show the computation. (3 marks)