6 Required information Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3) 171 (The following information applies to the questions displayed below] points In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y eBook References of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Case Selling price per unit to outside customers i Variable costs per unit Division X: Capacity in units Number of units being sold to outside customers Fixed costs per unit (based on capacity) Division Yi Number of units needed for production 101,000 101,000 94,000 78,000 $53 $ 30 $23 $.20 510 $5 16,000 16,000 Purchase price per unit now being paid to an outside supplier 548 $40 View previous attempt Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place?