You are the manager of the manufacturing division of Superio…

Yоu аre the mаnаger оf the manufacturing divisiоn of Superior Corporation, and you need to determine the price that should be charged for component G that is transferred to the assembling division. Both divisions are evaluated as profit centres. The production costs for one unit of component G is as follows:   Direct materials $4.75 Direct labour 6.20 Variable overhead 3.15 Fixed overhead 2.32   The assembling division uses component G, along with externally supplied components, in the assembly of product F. The assembling division can sell product F externally for $52. The costs incurred by the assembling division, excluding the cost of component F, are as follows:   Direct materials $7.40 Direct labour 6.50 Variable overhead 4.27 Fixed overhead 3.39     Required Determine the maximum and the minimum transfer price that could be used for each unit of component G. Explain whether the managers would be able to negotiate a transfer price. Indicate what the transfer price would be if it is set equal to full production costs. Indicate what the transfer price would be if it is set equal to variable production costs. Briefly explain why the manufacturing division would be reluctant to transfer component G at a price equal to variable costs. Identify what other factors may have an influence on the determination of the transfer price.