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Question 5 ABC Unicycle makes unicycles and has two divisions. Each division is evaluated as a profit center. The Wheel division, located in Nambia, produces unicycle wheels and can choose to sell wheels on either the open market at $30 per wheel, or sell them to the Assembly division. The Assembly division, located in Elbonia, assembles unicycles and can choose to either buy wheels from the Wheel division or purchase wheels on the open market. (* Fixed overhead costs are based on current production volumes) Required: A. What is the likely range of transfer prices between the Wheel Division and Assembly Division for an additional wheel? B. What is the likely range of transfer prices per wheel between the Wheel Division and Assembly Division for an additional 420 wheels (hint: it is not the answer in part A x 420)? C. Assume that in future years that the Wheel Division will only sell wheels to the Assembly Division and no longer sell any wheels on the open market. Should the Wheel Division continue to be assessed as a profit centre? If it is not a profit centre, then how should it be evaluated? Explain your response. Question 6 (Continuation of Question 5) Suppose that the tax rate in Nambia is 10% and the tax rate in Elbonia is 30%. From the quantitative point of view of the head office, what is the optimal transfer price for a single wheel

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