Algodones Inc. has a number of divisions, including a Mattress Division and a Furniture Division. The Furniture Division owns and operates a chain of furniture stores in the Midwest. Each year, the Furniture Division purchases mattresses for its bedroom suites. Currently, it purchases a basic mattress from an outside supplier for $230. The manager of the Mattress Division has approached the manager of the Furniture Division about selling mattresses to the Furniture Division. The full product cost of a mattress is $160. The Mattress Division can sell all of the mattresses it makes to outside companies for $230. The Furniture Division needs 10,000 mattresses per year; the Mattress Division can make up to 50,000 mattresses per year.

Required:
1. Which division sets the maximum transfer price? Which division sets the minimum transfer price?
2. Suppose the company policy is that all transfers take place at full cost. What is the transfer price?
3. Do you think that the transfer will occur at the company mandated transfer price? Why or why not?