Plasma is a company that produces televisions and components for televisions. The company has two divisions, Division Component (Division C) and Division Television (Division T).

Division C manufactures components for televisions. Division C sells components to division T and to external customers. Division T requires two components in each of the televisions that it manufactures and sells televisions directly to external customers. The following information relating to the divisions is provided:

Division C

Budgeted variable cost per component:

	R
Direct Material	14
Direct labour	28
Variable overheads	10
Selling costs (only for external sales)	2
Total variable costs per component	54

The following information relating to next year is also available:

Fixed costs	R595 000
Production capacity	200 000 components
External demand	120 000
Demand from Division T	2 components for each television

The expected external selling price for a component is R75.

Division T

Budgeted variable cost per television:

	R
Direct Material (Excluding components)	60
Components	??
Direct labour	28

In addition, fixed costs are budgeted to be R2 900 000 for next year. Annual sales of televisions are expected to be 40 000 units at a price of R350 per television. Division T can source components from an external supplier at R74 per component.

Transfer Pricing Policy

Division C must satisfy the demand of Division T before selling components externally. Division T is allowed to purchase components from Division C or from external suppliers.

REQUIREMENTS:
2.1	Calculate the minimum transfer price that Division C will be willing to accept for each component.	(5)
2.2	Calculate the maximum transfer price that Division T will be willing to pay for each component.	(2)
2.3	Calculate the budgeted profit for Division T assuming a transfer price of R52 per component.	(6)
2.4	Calculate the minimum transfer price(s) that Division C will be willing to accept for each component assuming that Division T requires 130 000 components.	(7)