Question 5 (12 marks) Staron Ltd's Cabinet Division manufactures a standard cabinet for television sets. The cost per cabinet is: Variable cost per cabinet $70 Fixed cost per cabinet 30* Total cost per cabinet $100 *Based on a capacity of 10,000 cabinets per year Part of the Cabinet Division's output is sold to outside manufacturers of television sets and part is sold to Staron's Television Division, which produces a TV set under its own name. The Cabinet Division charges $140 per cabinet for all sales. The costs, revenue, and net operating income associated with the Television Division's TV set is given below: Selling price per TV set Variable cost per TV set: $480 Cost of the cabinet $140 Variable cost of electronic parts 210 Total variable cost 350 Contribution margin 130 Fixed costs per TV set 80* Net operating income per TV set $50 *Based on a capacity of 3,000 sets per year The Television Division has an order from an overseas source for 1,000 TV sets. The overseas source wants to pay only $340 per set. Required: 1. Assume the Cabinet Division has idle capacity. If there is an outsider supplier willing to offer standard cabinet to the Television Division for $100 per cabinet, explain whether the Cabinet division be willing to lower the selling price to $100 to facilitate internal transfer to Television Division. (4 marks) 2. Refer to the original data and assume that both the Cabinet Division and the Television Division have idle capacity. Under these conditions, explain whether it is advantageous for the company as a whole if the Television Division rejects the $340 price. Show computations to support your answer. (4 marks) 3. Refer to the original data and assume that the Television Division has idle capacity, but the Cabinet Division is operating at capacity and could sell all of its cabinets to outside manufacturers. Compute the profit impact to the Television Division of accepting the 1,000-set order at the $340 unit price. (4 marks)