Staron Ltd$\text{'}$s Cabinet Division manufactures a standard cabinet for television sets. The cost per cabinet is:

Variable cost per cabinet

Fixed cost per cabinet

Total cost per cabinet

$$70$

$30$

$*$Based on a capacity of $10,000$ cabinets per year

Part of the Cabinet Division's output is sold to outside manufacturers of television sets and part is sold to Staron's Television Division, which produces a TV set under its own name. The Cabinet Division charges $$140$ per cabinet for all sales.

The costs, revenue, and net operating income associated with the Television Division's TV set is given below:

Selling price per TV set

$$480$

Variable cost per TV set:

Cost of the cabinet

Variable cost of electronic parts

Total variable cost

Contribution margin

Fixed costs per TV set

Net operating income per TV set

$350$

$130$

${80}^{**}$

$$50$

$*$Based on a capacity of $3,000$ sets per year

The Television Division has an order from an overseas source for $1,000$ TV sets. The overseas source wants to pay only $$340$ per set.

Required:

Assume the Cabinet Division has idle capacity. If there is an outsider supplier willing to offer standard cabinet to the Television Division for $$100$ per cabinet, explain whether the Cabinet division be willing to lower the selling price to $$100$ to facilitate internal transfer to Television Division.

$(4$ marks$)$

Refer to the original data and assume that both the Cabinet Division and the Television Division have idle capacity. Under these conditions, explain whether it is advantageous for the company as a whole if the Television Division rejects the $$340$ price. Show computations to support your answer.

$(4$ marks$)$

Refer to the original data and assume that the Television Division has idle capacity, but the Cabinet Division is operating at capacity and could sell all of its cabinets to outside manufacturers. Compute the profit impact to the Television Division of accepting the $1,000-$set order at the $$340$ unit price.

$(4$ marks$)$