Question 3 GAC Motors is a divisionalized firm with a transfer policy in place. The Aerodynamic Division manufactures a component required by the Motor Assembly Division for which there is currently no external market. One unit of the component is required for every final output. The Motor Assembly Division's projected selling price and output are as follows: Net selling price (AV) Quantity sold (Units) 1500 2.000 1300 1200 4,000 950 5,000 3.000 The costs of each division are as follows: | Aerodynamic (N) Motor Assembly (14) Variable cost per unit 220 140 Fixed costs attributable to the product 1.200.000 1.800.000 The transfer price for the intermediate product is #4700 on cost-plus mark-up basis. Required: a) Show the profit computations for the divisions and the company as a whole. What is the optimal decision for the firm? b) Suppose that an external market can be found but will result in additional fixed costs of 24500.000 and additional variable costs of A40/unit with an external sales price of A1900 per unit. How will this affect the decision of the Aerodynamic Division manager? [30 points) Formulae 1. = 2. Il contribution/uni x 100 sales price/unit fixed costs x Sales value contribution fixed costs contribution/unit fixed costs * sales price/unit contribution/unit 3. = 4 = fixed costs Tarpet profit 5. = 6. contribution/unit fixed costs +Target profit contribution/unit fixed costs+Target profit x sales price/unit contribution/unit 7