1. MVS, Inc. produces cleaning equipment, and operates several divisions. Division A produces a product that it sells to other companies for $26 per unit. It is currently operating at full capacity of 60,000 units per year. Variable manufacturing cost is $13 per unit, and variable marketing cost is $3 per unit.

The company wishes to create a new division, Division B, to produce an innovative new tool that requires the use of Division A's product (or one very similar). Division B will produce 15,000 units. Division B can purchase a product equivalent to Division A's from Company X for $20 per unit. However, MVS, Inc. is considering having Division A supply Division B with the product.

If Division A supplies Division B, the transfer price would be $17 and there would be no marketing costs associated with the units.

From Division B's perspective the net benefit (cost) is?

A. Net benefit of $45,000

B. Net benefit of $40,000

C. Net cost of $135,000

D. Net cost of $60,000

2. MVS, Inc. produces cleaning equipment, and operates several divisions. Division A produces a product that it sells to other companies for $26 per unit. It is currently operating at full capacity of 60,000 units per year. Variable manufacturing cost is $13 per unit, and variable marketing cost is $3 per unit.

The company wishes to create a new division, Division B, to produce an innovative new tool that requires the use of Division A's product (or one very similar). Division B will produce 15,000 units. Division B can purchase a product equivalent to Division A's from Company X for $20 per unit. However, MVS, Inc. is considering having Division A supply Division B with the product.

If Division A supplies Division B, the transfer price would be $17 and there would be no marketing costs associated with the units.

From MVS, Inc.'s perspective the net benefit (cost) is?

A. Net benefit of $90,000

B. Net benefit of $45,000

C. Net cost of $45,000

D. Net cost of $60,000