Ocean Limited has two divisions: Assembly and Mechanical. The Assembly Division transfers partially completed components to the Mechanical Division at a predetermined transfer price. The Assembly Division's standard variable production cost per unit is $950. This division could sell all its components to outside buyers at Question (12 marks) $1,140 per unit in a perfectly competitive market The Mechanical Division has a special offer of $1,495 for its product. The Mechanical Division incurs variable costs of $200 in addition to the transfer price for the Assembly Division's components. Both divisions currently have spare production capacity. Required: a) Determine a transfer price using the general transfer pricing rule. (2 marks) b) What transfer price would you recommend if there was no outside market for the transferred component, and the Assembly Division has spare capacity? (2 marks) c) Assume that the transfer price has been set at $1,133, is the Mechanical Division manager likely to want to accept or reject the special offer? Why? (3 marks) d) Is the decision in the best interests of Ocean Limited as a whole? Explain. (3 marks) e) When is it more appropriate to use market-based transfer price rather than cost- based transfer price? (2 marks)