5 3 KM Inc. is a company of which one segment makes guns and another produces tanks. Costs for a tank produced by the Tank Division are as follows: Direct material 12 Direct labor Variable overhead Variable S&A (both for external and internal sales) 1 Total variable cost 21 Fixed overhead Fixed S&A Total fixed cost 5 Total cost per tank Markup on total variable cost (33 1/3%) List price to external customers 3 2 26 7 33 Fixed costs are allocated to all units produced based on estimated annual production Estimated annual production: 400.000 tanks Estimated sales to outside entities: 300.000 tanks Estimated sales by the Tank Division to the Spear Gun Division: 100.000 tanks The managers of the two divisions are currently negotiating a transfer price. Tank Division has no alternative use for the facilities that make the tanks for internal transfer. Gun Division can buy equivalent tanks externally for 25. Calculate the upper and lower limits for which the transfer price should be set. and compute a transfer price that divides the profit between the two divisions equally. 5 3 KM Inc. is a company of which one segment makes guns and another produces tanks. Costs for a tank produced by the Tank Division are as follows: Direct material 12 Direct labor Variable overhead Variable S&A (both for external and internal sales) 1 Total variable cost 21 Fixed overhead Fixed S&A Total fixed cost 5 Total cost per tank Markup on total variable cost (33 1/3%) List price to external customers 3 2 26 7 33 Fixed costs are allocated to all units produced based on estimated annual production Estimated annual production: 400.000 tanks Estimated sales to outside entities: 300.000 tanks Estimated sales by the Tank Division to the Spear Gun Division: 100.000 tanks The managers of the two divisions are currently negotiating a transfer price. Tank Division has no alternative use for the facilities that make the tanks for internal transfer. Gun Division can buy equivalent tanks externally for 25. Calculate the upper and lower limits for which the transfer price should be set. and compute a transfer price that divides the profit between the two divisions equally