General guideline, transfer price range. The Shamrock Company manufactures and sells television sets. The Assembly Division assembles the television sets. It buys the screens for the television sets front the Screen Division. The Screen Division is operating at capacity.

The incremental cost of manufacturing the screens is $84 per unit. The Screen Division can sell as many screens as it wants in the outside market at a price of $132 per screen. If it sells CHAPTER 23 screens in the outside market, the Screen Division will incur variable sales and distribution cost of $4.80 per unit. Similarly, if the Assembly Division purchases screens from the outside market, it will incur variable purchasing costs of $2.40 per unit.
Required 1. Using the general guideline presented in the chapter, what is the minimum transfer price at which the Screen Division will sell screens to the Assembly Division?
2. Suppose division managers act autonomously to maximize their division’s operating income either by transacting internally or buying and selling in the market. If the two division managers were to negotiate a transfer price, what is the range of acceptable transfer prices?