roduced Bet costing, decide whether the products LOS sfer price: $34.08 Developing Transfer Prices P10.BUSINESS APPLICATION Tim Corporation produces sound equipment for home use. The Research and Development (R&D) Division is responsible for continually evalo uating and updating critical electronic parts used in the corporation's products. Two boards for the company's sound equipment. One of Tim's specialties is a sound dissemi- nation board (SDB) that greatly enhances the quality of Tim's speakers. Demand for the SDB has increased significantly in the past year . As a result , R&D has increased its production and assembly labor force. Three outside customers now want to purchase the SDB. To date, R&D has been producing SDBs for internal use only, The R&D controller wants to create a transfer price for the SDBs that will apply to all intracompany transfers. Estimated demand over the next six months is 235,000 SDBs for internal use and 165,000 SDBs for external customers, for a total of 400,000 units. The following data show cost projections for the next six months: Materials and parts $2,600,000 Direct labor 1.920,000 Supplies 100,000 Indirect labor 580,000 Other variable overhead costs 200,000 Fixed overhead, SDBS 1,840,000 Other fixed overhead, corporate 560,000 Variable selling expenses, SDBS 1,480,000 Fixed selling expenses, corporate 520,000 General corporate operating expenses 880,000 Corporate administrative expenses 680,000 A profit markup of at least 20 percent must be added to total unit cost for internal trans- fer purposes. Outside customers are willing to pay $35 for each SDB. All categories of fixed costs are assumed to be unavoidable. REQUIRED 1. Prepare a table that shows the total budgeted costs and the cost per unit for each com- ponent of the budget. Also show the profit markup and the cost-plus transfer price. 2. Should R&D use the computed transfer price? Explain the factors that influenced your decision