Introduction It is important to note that the given transfer price analysis showed a number of critical decision making points in favor of the proposed buying pattern. The analysis revealed that the benefits would primarily manifest themselves in terms of savings for divisions A and B. At the same time, Division C will still be able to supply half of the part needs for both A and B. The assessment mainly looked at the differentials between the current situation and proposal, where the calculations were made on the basis of changes in regards to internal and external purchases. The results of the analysis are that the proposal benefits monetarily both Divisions A and B. Divisions A and B The key advantage of the proposal affects Divisions A and B, which are estimated to save around $70000 and $40000, respectively. The difference is mainly the result of being able to purchase the essential parts at a larger volume and a lower price from external suppliers. It is possible to further increase the percentage of parts delivered by the external suppliers, which will inevitably lead to savings. Division C In the case of Division C, it is evident that the department will no longer produce as many parts as it is used to since the majority of demand shifter from internal suppliers to external ones. In other words, Division C will be able to focus on producing other parts besides 101 or 201, which means that there is an opportunity for innovation and new market interactions. Recommendation The core of the recommendation is to shift towards the proposal as soon as possible since there are major savings to be made. It is important to reduce the overall reliance of Divisions A and B on Division C because the latter does not offer an equivalent degree of flexibility as external competitors. Best Regards, Name____________________________ Short Essay The given analysis essay will mainly focus on three different pricing strategies, which are cost plus a mark-up, fair market value, and price negotiated by the managers. These transfer pricing policies will be described, defined, and analyzed in regards to their strengths and weaknesses as pricing approaches since they vary in simplicity, flexibility, and variability. Cost Plus a Mark-Up for The Selling Division It is important to note that cost plus a mark-up pricing method is a measure of a price determined by adding costs and adding a specific mark-up to ensure profitability. The main strength of such a pricing approach is the fact that price will ensure profits and costs will be covered (Kurt Heisinger, 2016). In addition, it is highly simple to implement since only cost and mark-up considerations need to be made in order to derive the final price. The main weakness of such an approach is the fact that it ignores factors outside the production and costs. It does not factor in competitor prices and customers’ willingness to pay, which means that cost plus mark-up is blind to key market drivers. The pricing measures do not incentivize a manufacturer to reduce the manufacturing costs in order to decrease the price, which inevitably makes a division unable to compete with other more flexible suppliers. Fair Market Value Unlike the pre