S8-15 Determine transfer prices (Learning Objective 9) TK Electronics is a manufacturer with two departments: computer chips and cell phones. The computer chip that is produced in the Chips Department can be sold to customers at $5.00 per chip. The costs associated with the computer chips are as follows: Variable manufacturing costs $ 2.40 Variable selling and administrative costs $ 0.80 Capacity 500,000 units Current production 500,000 units The Cell Phone Department has been purchasing the chips that it needs for $2.75 per chip from Chips R Us, but the manager was thinking that if the Chips Department could supply the chips for less than what Chips R Us is asking, then it would arrange a transfer between departments instead of giving the business to an external company. Requirements 1. Should the Chips Department supply the chips to the Cell Phone Department under these circumstances? 2. If the Chips Department had sufficient capacity, would this make a difference? E8-45B Compute transfer pricing (Learning Objective 9) Refer to the TK Electronics information in S8-15. The Cell Phone Department needs 90,000 computer chips but half of the Chips Department's variable selling and administrative costs would still be incurred. Current production in the Chips Department is 400,000 chips. Should a transfer take place? If so, at what price? What other qualitative factors might need to be considered