A company has two divisions, Division 1 and Division 2. Division 1 manufactures and sells a product on the outside market that Division 2 could also use.

Selling price per unit (outside market) $63

Variable cost per unit $41

Fixed costs per unit (based on capacity) $4

Capacity in units 20,000

Division 2 would like to purchase 4,000 units from Division 1. Alternatively, Division 2 could buy the 4,000 units from an outside supplier for $50 each. The managers of Division 1 and 2 are evaluated based on divisional profits. Division 1 is currently selling 16,500 units on the outside market.

a) What is the lowest price that Division 1 would be willing to accept for a transfer?

b) What is the highest price that Division 2 would be willing to pay for a transfer?

c) Is there an acceptable transfer price range? If so, what is the range? If not, why is there not a range?