QUESTION 3 PART A Leisure Group Berhad has a number of divisions including a Hotel division and a Furniture division. The Hotel Division operates a number of budget hotels along the east coast states of Terengganu and Pahang. Each year, the Hotel division purchases furniture for its hotel rooms. Currently, it purchases a bed-side table from outside suppliers for RM42.00. The manager of the Furniture division has approached the manager of the Hotel division about selling bed-side tables to the Hotel Division. The manager of the Furniture Division has tabulated the cost of one unit of bed-side table as follows: Direct materials Direct labour Variable Overhead Fixed overhead Total manufacturing cost RM 8.00 4.00 3.00 12.00 27.00 Currently, the Furniture division has the capacity to produce 75,000 bed-side table but is only producing 60,000. The Hotel division needs 10,000 bed-side table per year. Required: a) Classify three (3) common transfer pricing policies that might be used by Leisure Group Berhad. b) Compute the minimum transfer price? c) Compute the maximum transfer price? (3 marks) (2 marks) (1 mark) d) Should the transfer take place between the Furniture division and the Hotel Division? Interpret your answer. (2 marks) e) Suppose that the manager of the Furniture Division and Hotel Division agree on a transfer price of RM30.00. What is benefit (or cost savings) to each division? What is the benefit (or cost savings) to the company as a whole? Show your computations. (4 marks) f) Suppose that the Furniture division were operating at full capacity. What is the minimum and the maximum transfer price? Should the transfer take place? Interpret your answer. (2 marks)