Question 4 Spectra Inc. a manufacturer of spectacles, has the following three distinct responsibility divisions, 1. Moulding Division 2. Assembling Division 3. Blue Light Division All three responsibility centres are considered profit centres. The Moulding Division produces 22,000 frames and transfers them to the Assembling Division at a price of 28 per frame. This division assembles and then sells the frames to opticians for 35 per frame. The Blue Light Division could buy 10,000 of these unassembled frames from the Moulding Division to transform them into blue light spectacles for external customers who spend a considerable amount of time working on computer screens. The variable costs to modify frames into blue light spectacles would cost the Blue Light Division 7 25 per unit before they can be sold to outside customers at a cost of 31.00 per frame. The Moulding Division has a capacity for the production of 30,000 frames. The following information pertains to the Moulding Division. Moulding Division Cost Per Unit Direct labour 5.10 Direct Material 10.90 Fixed Overhead 6.50 Variable Overhead 5.75 Total Cost per unit 28.25 REQUIRED Q4(a) Determine the minimum and the maximum transfer price for the unassembled frames transferred from the Moulding Division to the Blue Light Division. Indicate whether the managers would be able to negotiate a transfer price. [12 marks] Q4b) Explain whether your answer to part (a) would be different if the Moulding Division were operating at full capacity. Show all calculations [3 marks) Q40) Explain the effect of transfer pricing on the managers' decision and on goal congruence [10 marks] [TOTAL MARKS: 25)