Part B: Comprehensive Problems Question 1: Transfer pricing [12 marks] Sports Ltd has two departments, Packing and Racket. The Racket department is responsible for producing badminton rackets. The Packing department uses the rackets from the Racket department to package the rackets into packaging set made from recycled materials. Packing then sells their completed rackets product to various wholesalers at a price of $199. Racket currently is operating at full capacity. The following table provides you with the manufacturing costs per unit of each department: Details Racket department [per racket} Raw materials $1.75 Direct labour cost {manufacturing} $0.35 Allocated fixed costs $0.10 Advertising and marketing costs Total Costs 52.20 The Packing department currently has the following costs, the cost of the rackets from Racket as well as other material and labours costs of $2.50 per racket, fixed costs of $0.80 per racket, and advertising and marketing costs of $035 per racket. Greenbay who are a new competitor in the rackets market have been in contact with Racket and have offered to buy their rackets for $4.20 per racket and are willing to purchase 1,500 rackets. The manager of the Racket department is seriously considering this offer as it may bring in additional profits to their department and might lead to a big bonus for them at the end of the year. Required a} What would be the transfer price that Racket would need to cha rge for the rackets to the Racket department based on the above? Please provide adequate calculations and reasoning for the price you have chosen. b] Would this transfer price you have calculated above be appropriate for the Packing department to pay? Are there any implications to them accepting this price? Support your answer by providing calculations and a relevant discussion of any implications. c] Would your answer be different if Racket was n_ot operating at full capacity? What price do you think Racket would want to charge Packing and why? What do you think would be the most appropriate transfer price to be charged? State your reasons and provide appropriate calculations to support your