QUESTION ONE Alpha Corporation is a manufacturer of bicycles with two divisions. The frame division produces the bicycle frames, which are then transferred to the finishing division, which installs the tyres and other accessories. The companys best-selling product is the famous BMX bicycle. The frame division also sells its frames directly to other bicycle manufacturers, who install their own tyres and accessories, and brand it with their own names. The sales price for a frame is 80. The finishing division sells its finished bicycle for 190. The standard cost of bicycle is detailed as follows

BE131-6-AU 2 SECTION A Candidates MUST answer ONE question from this section. QUESTION ONE Alpha Corporation is a manufacturer of bicycles with two divisions. The frame division produces the bicycle frames, which are the transferred to the finishing division, which install the tyres and other accessories. The company's best-selling product is the famous BMX bicycle The frame division also sells its frames directly to other bicycle manufacturers, who install their own tyres and accessories, and brand it with their own names. The sales price for a frame is 80. The finishing division calls its finished bicycle for 190 The standard cost of bicycle is detailed as follows Division Frame Division Finishing Direct werial LIS 130 Direct labor 20 15 Variable overhead 30 30 Total 265 075 *Excluding the cost of material transferred from the frame division. Required: a) Assume that the frame division has no excess capacity 1) Use the general transfer pricing principle to compute the transfer price for frame division (5 marks) ii) Calculate the transfer price if it is based on standard variable cost with a 10 percent markup. Will the Frame Division accept the transfer at this price? (5 marks) CONTINUEDI