Analyze Transfer Pricing Data: MultiProduct Enterprises. Inc., is a decentralized organization that evaluates divi- sion management based on measures of division contribution margin. Divisions A and B operate in similar product markets. Division A produces a solid state elec- tronic assembly that may be sold to the outside market at a price of $16 per unit. The outside market can absorb up to 140,000 units per year. These units require two direct labor-hours each. If A modifies the units with an additional one half hour of labor time, the units can be sold to division B at a price of $18 per unit. Division B will accept up to 120.000 of these units per year. If division B does not obtain 120,000 units from A, then B will purchase the needed units for $18.50 from the outside. Division B incurs $8 of additional labor and other out-of-pocket costs to convert the assemblies into a home digital eletronic radio, calculator, telephone monitor, and clock unit. The unit can be sold to the outside market at a price of $45 each. Division A estimates its total costs are $925,000 for fixed costs and $6 per direct labor-hour. Capacity in division A is limited to 400,000 direct labor-hours per year.

Required: Determine the following:

a. Total contribution margin to A if it sells 140,000 units to the outside.

b. Total contribution margin to A if it sells 120,000 units to B.

c. The costs to be considered in determining the optimal company policy for sales by division A.

d. The annual contributions and costs for divisions A and B under the optimal policy.