MacBook and MacBook Pro are two divisions at the Apple Group. The MacBook division manufactures batteries which it sells

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MacBook and MacBook Pro are two divisions at the Apple Group.The MacBook division manufactures batteries which it sells to otherdivisions and external customers.The MacBook Pro division has designed a new product with the nameof MacBook Air, and has asked MacBook division to supply them withthe battery component. Each unit of MacBook Air will require onebattery component. This battery component will not be sold byMacBook to external customers. MacBook division has quoted atransfer price of R585 for each battery.It is the policy of Apple Group to reward managers based on theirdivisional returns on capital employed.Details of the monthly production for each division are asfollows:MacBook divisionOutput Battery components will be produced in batches of 1000units.Variable cost R195 per batteryFixed costs R60 000 (these are incurred to produce the batterycomponent)MacBook Pro divisionOutput MacBook Air will be produced in batches of 1000 unitsThe maximum customer demand is 6000 units.Variable costs R117 per unit plus the cost of the Batterycomponent.Fixed costs R75 000 (there are incurred specifically to produceMacBook Air.
The relationship between monthly customer demand and the sellingprice of MacBook Air is shown below:Demand selling price per unit1000 units R1 5602000 units R1 4303000 units R1 3004000 units R1 1705000 units R1 0406000 units R871Required:4.1. Calculate, based on the transfer price of R585 per batterycomponent, the monthly profit that would be earned because ofselling MacBook Air by:a) MacBook divisionb) MacBook Pro divisionc) Apple Group (9)4.2. Calculate the maximum monthly profit from the sale of MacBookAir for the Apple Group. (4)4.3. Calculate, using the marginal cost of the battery component asthe transfer price, the monthly profit that would be earned becauseof selling MacBook Air by:a) MacBook division.b) MacBook Pro divisionc) Apple Group. (5)4.4. Discuss, using the above scenario, the problem of settingtransfer price and suggest a transfer pricing policy that wouldhelp Apple Group to overcome the transfer pricing problems.