Question 1.2 At Regal Carpets and Rugs Limited, the Yarn Division produces yarn that is used by the Rugs Division. The cost of producing one reel of yarn is as follows: Direct materials (wool) Direct labour Variable overhead Fixed overhead* Total cost $10 5 4 5 $24 | * Based on production at full capacity of 200,000 reels The Yarn Division currently sells yarn to external customers at $29 per reel. However, because of a weak economy, it can only sell 150,000 reels of yarn this year. The Rugs Division can buy yarn from an external supplier for $28 per reel. It expects to use 50,000 reels of yarn this year. The manager of the Rugs Division has offered to buy 50,000 reels from the Yarn Division for $18 per reel. * 1.2.1: What is the lowest acceptable transfer price for the Yarn Division and the highest transfer price for the Rugs Division within which both divisions' profits would increase if internal transfer happened? Explain your answer. (8 marks) Your Answer (Expand the space as required)