The Transferly division currently makes use of 80% of their production capacity to manufacture 80 000 units of single product, the TFC. The financial results for the past year, ended 30 September 2022, were as follows: R000 Sales (80 000 units) 160 000 Less: Cost of sales 100 000 Variable cost 60 000 Fixed cost 40 000 Gross profit 60 000 Less: Selling and marketing expenses 15 000 Net profit 45 000 The division is unsure whether or not to keep their selling and production strategies the same for next year. A 10% increase in variable cost and 5% increase in fixed cost are expected, although selling prices and selling and marketing expenses per product will remain unchanged due to market factors. The marketing manager has done research into the TFC product and noted that demand for the product is price sensitive. The estimated demand for the product next year at related prices are as follows: Selling price (R) Demand (units) R2 650 60 000 R2 500 70 000 8 R2 000 80 000 R1 800 85 000 The MoneyMover division has expressed interest in buying 40 000 units (no more, no less) of the TFC product from Transferly division. A saving of 2% in respect of selling and marketing expenses is expected for these 40 000 units if transferred internally. The MoneyMover division can buy the TFC product in the external market at a cost of R2 000 per product.

Ignoring the possibility of internal sales, devise a sales strategy for the Transferly division that will maximize the divisions profits next year. (8) Suggest a suitable transfer pricing range (minimum and maximum price) for the division that will be goal congruence for the company as a whole. You may assume that the division had implemented the strategy you determined in answer to (a) above. The selling price for next year has been communicated to customers and cannot be changed in the short term.