Work on question 20, please answer each part and shows clearly.

Question 20 (13 points) Listen Sled-dog Industries manufactures snowmobiles. Paragraph BIU = 6 . . . All divisions are treated as profit centres. Engines are manufactured in Windsor, Ontario in the engine division. The snowmobile division is located in Montreal, Quebec and assembles the final product. The snowmobile division can purchase engines internally or buy them from multiple outside suppliers. The transfer price for the engine is set at the long-run average market price. Snowmobile selling price 9,900 Long-run average selling price for engines 6,000 Engine division incremental costs 3,600 Snowmobile division incremental costs 4,500 Required: 1. Should transfers be made to the snowmobile division if there is no unused capacity in the Engine division? 2. Suppose the engine division can manufacture 8,000 engines a year and sales to market are only 7,000. Should 1,000 engines be transferred to the Snowmobile division? At what transfer price? 3. If the engine division quoted a transfer price of $5,400 what would be the contribution to Sled-dog as a whole? As the manager of the snowmobile division would you be inclined to accept the transfer? Suggest a better pricing arrangement? 1. Suppose the manager of the engine division has the option of cutting the external price to $5,800, with certainty that sales will rise to 8,000 engines or maintain the external price of $6,000 for 7,000 engines and transferring 1,000 engines to the snowmobile division. What transfer price would produce the same operating income for the Engine division? hp