Refer to Exercise E12.29 Q. The assembly division's absorption cost of a component is $510, which includes $60 of applied fixed overhead costs. The transfer price has been set at $561, which is the assembly division's absorption cost plus a 10 per cent markup. The electrical division has a special offer of $697.50 for its product. The Page 606 electrical division incurs variable costs of $150 in addition to the transfer price for the assembly division's components. Both divisions currently have spare production capacity. Required: 1. Is the electrical division manager likely to want to accept or reject the special offer? Why? 2. Is this decision in the best interests of Electro Ltd as a whole? Explain. 3. How could the situation be remedied using the transfer price