RaceFest Inc. has two operating divisions. The Ski Division makes water and snow skis, and the Binding Division makes rubber boots for water skis. The Binding Division estimates that 800,000 pairs of boots will be produced in 2010; of those, 600,000 pairs will be sold to the Ski Division and 200,000 pairs will be sold externally. Managers of the two divisions are in the process of determining a transfer price for a pair of boots. The following information for the Binding Division is available: Direct material $27 12 7 4 $50 $10 Direct labor Variable overhead Variable S&A (both for external and internal sales) Total variable cost Fixed overhead (rate based on estimated annual production) Fixed selling and administrative (rate based on estimated annual sales) Total fixed cost Total cost per pair of boots Markup on total variable cost (40%) List price to external customers los 5 15 $65 20 $85 Required: a. Determine a transfer price based on variable production cost. b. Determine a transfer price based on total variable production cost plus normal markup. c. Determine a transfer price based on full production cost. d. Determine a transfer price based on total cost per pair of boots