Question 1 A firm has two divisions: an UP division and a DOWN division that operate with autonomy. The UP division manufactures two different products, one of which is transferred to the DOWN division within the same company, and the other product is sold externally. The external market price for the latter product is $120 per unit. The transfer price for the internally transferred product is based on its full cost in the UP division plus a mark-up of 20% over its full cost. The current total indirect manufacturing costs in the UP division are $120,000, consisting of $40,000 variable overhead and $80,000 fixed overhead. The firm allocates all overhead costs to the products based on their respective direct labor costs (dollars). The current sales quantities and direct costs incurred in the UP division are given in the table below: urrent Interna urrent Externall Output Direct labor costs Direct material costs Marketing costs 900 $20,000 $20,000 $5,000 1,000 20,000 30,000 A new external customer offers to buy from the UP division 600 units of a slightly modified version of the externally sold product at a unit price of $90. It is commonly known that the entire industry has idle capacity, which also holds for the UP division. The new order would result in additional direct labor costs of $20,000, additional direct material costs of $17,000 and additional variable overhead costs of $15,000. Total fixed production costs will remain unchanged Required a. Calculate the current price used (per unit) when the UP division transfers units to the DOWN division. b. Should the offer from the new external customer be accepted from a firm-wide perspective? Show calculations to support your answer c. If division managers are compensated on the basis of division income, will the UP division accept the offer from the new external customer? Show calculations to support your