Question - 3 Swiss Watch Company The Swiss Watch Companyis manufacturing one type of watch, it has two divisions production division and Packing and retailing devision. The production Division manufactures watches and then sells them to retail Division, which packs the watches and sells them to retailers. Production's cost: OMR Direct materials per watch 3 Direct labour per watch 3.5 Variable overhead per watch 2.5 Division fixed cost 50,000 OMR 4.5 Packing & Retail costs: Direct materials per watch Direct labour per watch Variable overhead per watch Division fixed cost 1.5 2 30,000 Notes: Fixed costs shown above are per watch for 100,000 units. Required: a) What is the Production Divisions transfer price if the price is set at full cost +40%.(up to 2 decimal places) 7 Marks b) Packing and retail division has purchased 100,000 watches from production division and sold to outside market for $75. what is the annual profit of Swiss watch Company? 8 Marks c) Compare and evaluate the profit of Swiss watch company if production division negotiate transfer price between division to $20. 5 Marks d) Production division has excess capacity of 30,000 and there is no external market available. Explain the limited or unlimited capacity and decision rule. 5 Marks (Total-25 Marks)