PLEASE HELP ME TO ASNWER THIS QUESTION.

2. Would this transfer price you have calculated above be appropriate for the Hoop department to pay? Are there any implications to them accepting this price? Support your answer by providing calculations {total costs and selling price) and a relevant discussion of any implications. [8 marks] Would your answer be different if Hula was n_ot operating at full capacity? What price do you think Hula would want to charge Hoop and why? What do you think would be the most appropriate transfer price to be charged? State your reasons and provide appropriate calculations to support your answer. {7 marks] Question 1: Transfer Pricing [20 marks] ABC Ltd has two departments Hula and Hoop. The Hula department is responsible for producing sunscreen for young children. The Hoop department uses the sunscreen from the Hula department to package the sunscreen into tube style packaging made from recycled materials. Hoop then sells their completed sunscreen product to various wholesalers at a price of $5.50. Hula currently is operating at full capacity. The following table provides you with the manufacturing costs per unit of each department: Raw materials $0.75 Direct labour cost (manufacturing) $0.35 Advertising and marketing costs Total Costs Im Allocated fixed costs $0.10 The Hoop department currently has the following costs, the cost of the sunscreen from Hula as well as other material and labour costs of $2.10 per kilo, fixed costs of $0.80 per kilo and advertising and marketing costs of $0.75 per kilo. Shady who are a new competitor in the sunscreen market have been in contact with Hula and have offered to buy their sunscreen for $2.20 per kilo and are willing to purchase 1,500 kilos. The manager of the Hula department is seriously considering this offer as it may bring in additional profits to their department and might lead to a big bonus for them at the end of the year. 1. what would be the transfer price that Hula would need to charge for the sunscreen to the Hoop department based on the above? Please provide adequate calculations, formulas, and reason for the price you have chosen. [5 marks]