Question 3: (15 Marks) Pacific Telecommunications has two divisions and operates out of Auckland, New Zealand. The Express Division manufactures and transfers a range of computer circuit boards to the Harris Division, which uses those circuits to produce telecommunications equipment for the Asia-Pacific market. The Express Division is operating at full capacity. One circuit board that it transfers to the Harris Divisioncircuit A569has variable costs of $32 per 100 units, and it can be sold in the external market to other companies in the computer industry for $40 per 100 units. To produce its final product, the Harris Division incurs additional variable manufacturing and selling costs of $65 per 100 units and sells the final product to the external market for $120 per 100 units. The Harris Division has just been contacted by a Malaysian-based company that is offering a product similar to circuit A569 at the very competitive price of $28 per 100 units. The manager of the Harris Division is very keen to take up this Required: 1. Calculate the transfer price for circuit A569, using the general transfer pricing rule, assuming that the Express Division has no spare capacity. (5 marks) [Answer and show workings here] 2. Recalculate the transfer price assuming the Express Division has spare capacity and has no other opportunities for that capacity. Explain the likely transfer price if the company policy for transfer pricing is variable cost plus 20 per cent. (5 marks) [Answer and show workings here] 3. Is it in the best interests of the company as a whole if the manager of the Harris Division purchases its circuits from the Malaysian company rather than from the Express Division? Assume that the Express Division has spare capacity. (5 marks)