Compute Transfer Prices (L.O.1): Washington Enterprises is a real estate company with a leasing division that rents and manages properties for others and a maintenance division that performs services such as carpentry, painting, plumbing, and electrical work. The maintenance division has an estimated variable cost of $18 per labor-hour. The maintenance division works both for Washington Enterprises and for other companies. It could spend 100 percent of its time working for outsiders. The maintenance division charges $35 per hour for labor performed for outsiders. This rate is the same as the rates charged by other maintenance companies. The leasing division complained that it could hire its own maintenance staff at an estimated variable cost of $20 per hour.

Required:

a. What is the minimum transfer price that the maintenance division should obtain for its services, assuming it is operating at capacity?

b. What is the maximum price that the leasing division should pay?

c. Would your answers in a or b change if the maintenance division had idle capacity? If so, which answer would change, and what would the new amount be?