Transfer prices) In each of the following cases, the Speaker Division can sell all of its production of audio speakers externally or some internally to the Sound System Division and the remainder to outside customers. Speaker Division’s production capacity is 200,000 units annually. The data related to each independent case are as follows:

a. For each case, determine the upper and lower limits for a transfer price for speakers.

b. For each case, determine a transfer price for the Speaker Division that will provide a $10 contribution margin per unit.

c. Using the information developed for part (b), determine a dual transfer price for case 1 assuming that Sound System will be able to acquire the speakers from the Speaker Division at $10 below Sound System’s pur¬ chase price from outside suppliers. LO.1

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282 20 Speaker Division Case 1 Case 2 Selling price to outside customers $75 $60 Production costs per unit Direct material Direct labor Variable overhead Fixed overhead (based on capacity) Other variable selling and delivery costs per unit* Sound System Division Number of speakers needed annually 80316 1 4 Current unit price being paid to outside supplier 40,000 $65 40,000 $52 "In either case, $1 of the selling expenses will not be incurred on intracompany transfers.