Zip Learning Technologies $($Zip$)$ has three main divisions, $($see the image below$).$ The Technology Unit focuses on the adoption of innovative technology for the Zip platform, as well as assisting with the production of videos. The Technology Unit has also grown a significant external client base with good growth in revenue. The Education Unit focuses on developing content both in$-$house and in collaboration with teachers and educational professionals. The Digital Online Platform Unit focuses on the development of a new online learning application, which would also require collaboration with the other two divisions. CEO and founder, Colin Hay has decided that he should allow the mangers of each of the three divisions significant autonomy in decision$-$making. He believed this was the best way to maximise performance so$,$ he opted to measure performance of the three divisions on profits relative to target.Transfer pricing issues

While Colin valued divisional manager autonomy and decision$-$making, he felt, when it comes to internal transactions, the organisational interests should normally prevail. To this end, the key components of the company's transfer pricing policy were:

all transfers would occur at full cost plus a mark$-$up of $10\%$;

there would be no sourcing autonomy; transacting internally would be the first priority $[$currently internal transactions account for approximately $25\%$ of divisional activity$]$; and $.$

divisions are permitted to use any spare capacity to meet external demand.

The manager of the Technology unit $-$ Carly Taylor $-$ has raised concerns about the policy. Carly is proud of the innovation and creativity with the technological developments the division has been able to generate, particularly in the last two years. This has resulted in an increase in demand for their services from external customers. Carly argues that her profits would be higher if she had more autonomy to service outside customers. She says: $".....$full costs plus $10\%$ just does not give us enough of a return...we could be earning twice the profit on outside work.....I need more freedom in my decision$-$making....."

Which of the following statements are more likely to be correct:

Note: multiple answers possible

The adoption of a market$-$based transfer pricing method combined with sourcing autonomy is more likely to enhance profits at Zip than the use of dual$-$transfer pricing method with sourcing autonomy

Changing the transfer pricing method will have little effect on managerial motivation as the size of the divisional profits is not relevant to the overall profits of Zip.

The adoption of a dual$-$transfer pricing policy would work best at Zip to encourage sourcing autonomy and drive profits upwards

The problem with the current transfer pricing policy is that the objective of providing divisional manager autonomy clashes with the reluctance of Colin to embrace sourcing autonomy in intra$-$company transfer decisions.

Instead of using full cost in the determination of the transfer price, Zip would be better suited to using the variable cost plus a mark$-$up of $25\%$; as the size of the mark$-$up is the critical element.