QUESTION ABOUT TRANSFER PRICING. PLEASE HELP!

Parkside Inc. has three divisions (Entertainment, Plastics, and Video Card), each of which is considered an investment center for performance-evaluation purposes. The Entertainment Division manufactures video arcade equipment using products produced by the other two divisions, as follows:

• The Entertainment Division purchases plastic components from the Plastics Division that are considered unique (i.e., they are made exclusively for the Entertainment Division). In addition, the Plastics Division makes less-complex plastic components that it sells externally and earns $3 contribution margin per unit.
• The Entertainment Division purchases, for each unit it produces, a video card from Parkside's Video Card Division, which also sells this video card externally (to other producers) for $20 per unit. This video card is also available from external suppliers for $20 per unit.
• The per-unit manufacturing costs associated with each of the above two items, as incurred by the Plastic Components Division and the Video Card Division, respectively, are:

Plastic Components Direct material $1.25 Direct labour 2.35 Variable overhead 1.00 Fixed overhead 0.40 Total cost per unit