Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing $24,000$ units from an outside supplier for $$14\mathrm{.}00$ per unit. Polk is currently operating at less than its full capacity of $620,000$ units and has variable costs of $$6\mathrm{.}00$ per unit. The full cost to manufacture the unit is $$10.$ Polk currently sells $460,000$ units at a selling price of $$19$ per unit.

Required:

a$.$ What will be the effect on Avery Company's operating profit if the transfer is made internally?

b$.$ What is the minimum transfer price from Polk's perspective?

c$.$ What is the maximum transfer price from Bishop's perspective?

Complete this question by entering your answers in the tabs below.

Required $A$

Required C

What will be the effect on Avery Company's operating profit if the transfer is made internally?