QUESTION 2 Raven Stat Bhd (RSB) manufactures and supply variety of rubber-based products. Rubber Division collects and process milky latex into liquid latex concentrate which can be used for production of rubber products. The division supply liquid latex concentrate to Glove Division and also to outside customers. Glove Division uses liquid latex concentrate to produce specialized gloves for local market in health and care industry. Rubber division normally supplies 1,000 liters of liquid latex concentrate to Glove Division monthly at an agreed internal transfer price of marginal cost plus 25% mark up and 400 liters to outside customers. Based on external market, normal selling price was set at RM480 per liter. The division incur variable cost of 40% from normal selling price and RM10,000 fixed costs per month. Glove Division charges its customers a dozen of its glove for RM2. A normal sale for the division is 300,000 dozens of gloves per month. The division incurs variable costs of RM0.80 for each dozen of glove and a fixed cost of RM20,000 per month. To-date, the production capacity is at 60% and the division is expected to have more customers in the future due to drastic and increasing demand for gloves because of the pandemic, Covid-19. Recently, Miss Salena, a manager of Doodle Enterprise, a baby product manufacturer, has offered to purchase 400 liters liquid latex concentrate on a monthly basis from Rubber Division at a price of RM600 per liter. Madam Sofea, the manager of Rubber Division is interested to supply the quantity requested by Miss Salena since this will generate more profit to the division as compared to if continuously transfer liquid latex concentrate internally. However, she is worried that her decision will not be agreed by the top management of RSB. Required: a) Calculate the monthly profit of each division and the company as a whole, based on normal practice. (Show Income Statement and relevant computations) (8 marks) b) i) Evaluate the effect on the profit of each division as well as the company as a whole if external market price is used as a basis of transfer pricing. (Show relevant computations) (7 marks) ii) MAF551/FEB2021/SET1 Explain two (2) features of a good transfer pricing policy. (3 marks) c) Analyse the impact on the division's profitability and company's as a whole if the offer from Miss Salena was accepted. Justify your answer. (7 marks) (Total: 25 marks)