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A firm uses negotiated transfer prices to transfer costs from the Seller Department and the Buyer Department. Buyer Department uses a key input from Seller

A firm uses negotiated transfer prices to transfer costs from the Seller Department and the Buyer Department. Buyer Department uses a key input from Seller Department. Buyer Department can buy this good from the external market for $105 per unit.

Seller Department assigned the following per unit costs to each unit of producing this input.

  • Direct materials: $20 per unit
  • Direct labor: $26 per unit
  • Variable overhead: $22 per unit
  • Fixed overhead: $14 per unit

What is the range of negotiation (that is, the difference between the price ceiling and price floor)?

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