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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. Wheel Assembly Cost per unit Division Division Direct Labour $2.00 $6.00 Variable Materials 3.00 7.00 Variable Overhead Costs 4.00 8.00 Fixed Overhead Costs* 5.00 9.00 Other information Maximum capacity Current production volume 2,000 1,800 3,000 2,600 (* 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 between the Wheel Division and Assembly Division for 400 additional wheels (hint: it is not the answer in part A x 400)? 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? Explain your response

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