4 In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits Case 10 points Division 1 Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier 150.000 150.000 150.000 127, $ 39 $ 19 $ 9 $ 7 23.000 51 5 23,000 38 Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in valiable selling costs can be avoided an intracompany sales Determine the transfer price of the selling division Transfer price = MC 4 1-b. If the managers are free to negotiate and make decisions on their own, Will a transfer take place? Yes O NO 10 points 2-0. Refer to the data in case B above. In this case there will be no reduction in variable seling costs on intracompany soles Determine the transfer price of the selling division Transfer price 2-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes NO