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Pantalaimon Ltd. has 2 divisions: A and B. For Division A total fixed costs equal 5,000 and variable costs per unit equal 4. Division A

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Pantalaimon Ltd. has 2 divisions: A and B. For Division A total fixed costs equal 5,000 and variable costs per unit equal 4. Division A produces 1,000 units of the intermediary product that Division B needs to create the final product. Division B only needs 600 units of the intermediary product Managers of Pantalaimon Ltd. have established the policy that Division A can sell to external customers the units of intermediary product that Division B does not use for a price of 20. For Division B, total fixed and total variable costs of processing the 600 units of the intermediary product equal 10,000. The final product will be sold by Division B to external customers for 40. Required: a) Generate the profit statement of both divisions and calculate the profit for Pantalaimon Ltd. considering that Pantalaimon Ltd. has established a transfer price policy of full cost plus 20%. (10 points) b) Generate the profit statement of both divisions and calculate the profit for Pantalaimon Ltd. considering that Pantalaimon Ltd. has established a transfer price policy of variable cost. (5 points) c) Generate the profit statement of both divisions and calculate the profit for Pantalaimon Ltd. considering that Pantalaimon Ltd. has established a transfer price equal to 1. (5 points) d) Considering your results from a), b) and c), which is the transfer price Pantalaimon Ltd. should establish? Explain your answer in detail. (10 points)

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