QUESTION 2 (25 MARKS) (a) M Explain one (1) goal of transfer pricing. (W) State two methods for setting transfer pricing. (3 marks) (b) Dalfour Sdn Bhd has two divisions, which are Division Delta and Division Alpha. Division Delta produces electric motors which can be sold to an outside customer or can be used by Division Alpha to produce vacuum cleaners Currently, 80,000 electric motors are sold to one outside customer at a price of RM100 per motor. The remaining 20,000 units of the Division Delta's capacity are sold to Division Alpha. The fixed costs of Division Delta is RM1,500,000 per year and the variable cost to manufacture a motor is RM50. Division Alpha solls 20.000 vacuum Cleaners per year at a price of RM140 each. In addition to the costs of the electric motor. variable cost per unit to manufacture the vacuum cleaners in the Division Alpha is RM60. Fixed costs for Division Alpha totaled RM40,000 per year. Dalfour Sdn Bhd manages all its divisions as profit centers. In addition, it allows divisional managers to choose their own source of sale and supply. The company has a policy that requires all inter-divisional sales and purchases be recorded at variable cost as the transfer price. Required: 0) Assume that the external market demand for Division Delta's product is confined to one customer which only needs 80,000 motors. From the company's perspective, should Division Delta transfers 20,000 motors to the Division Alpha? Why? Show calculations. (6 marks) W) Calculate the transfer price under the general rule for the 20,000 units in question (b) () above. Is this price consistent with the current company policy? (2 marks) (W) Assume that Division Delta receives an offer from a second company to purchase the remaining 20,000 units at a price of RM59 per motor. From the perspective of the firm, should Division Delta accept this offer? Why? Show calculations. (9 marks) (iv) Under the situations stated in question (b)) above, does the current transfer pricing policy cause the managers of Division Delta and Division Alpha to take actions which are congruent with the goals of the company? Justify your