Case 1 Transfer Price Dickson Group has two divisions, some of their data are listed below: Current transfer pricing policy of the group The current policy of the group is that internal sales 6,500 units of Component C should be transferred at $1,440. The transfer price is lower than the market price because internal transfer can save the variable selling expense and some workload of staff. If the quantity of internal transfer is higher than 6.500 units, the transfer price can be negotiated between the two divisional managers. Required: (a) Based on the above information, write the profit statement including the two divisions and total for the group. Dickeon firmun - Profit Statement Additional data for Required (b), (c.) (d) Division C is considering buying a new equipment to increase its production capacity. This would increase current production volume by 20%. The cost of the equipment is $2,126,000 and is expected to have a useful life of three years, after which it could be sold for $20,000. The cost of capital of the company is 10%. Division C s manager plans to sell more to the external market after using the new equipment. Division E's manager may also consider selling more equipment to the external market if more internal transfer is possible. Required: (b.) Assume Division C 's manager decides to purchase the equipment to increase production quantity to 16,800 units and he has autonomy to make use all the increased units under the current external and internal selling prices, Write the revised profit statement as follows to reflect his allocation of all the production volume and estimated profit. (c) The main purpose of buying the equipment is to increase sales of Component C to the external market. Under this assumption, calculate the net present value (NPV) of the new equipment at the discount rate of 10%. (d.) After Division C increased production capacity. Division E also wants to increase internal transfer from 65,000 to 70,000 units. Discuss the transfer price