Carter Products Inc has a Valve Division that manufactures and sells standard valves on the open market. Carter also has a Pump Division that can use the valves in its manufacturing process for one of its pumps.The Pump Division is currently purchasing 10,000 valves per year from an overseas supplier at a cost of $23 per valve.Both divisions are evaluated as profit centers and Carter has a decentralized decision-making model.

The Valve Division has the following information:

Capacity in units:100,000 units

Selling price per unit to outside customers:$30

Direct materials per unit: $6

Direct labor per unit:$8

Variable overhead per unit: $3

Fixed costs per unit:$6

The Valve Division has ample idle capacity to meet the entire requirement for the Pump Division.

What is the range of transfer price that would satisfy both divisions and be acceptable to make the transfer occur?(2 marks

2- 1)The Valve Division has demand for 95,000 units to outside customers.What is the minimum transfer price that the Valve Division would accept to transfer 10,000 units? (3 marks)

3- Would this transfer price be acceptable to the Pump division? Why or why not?(2 marks)

The Valve Division is selling all that it can produce to outside customers and $3 of variable selling expenses can be avoided if the transfer between the Valve and Pump Division is made.

4- What is the minimum transfer price that the Valve Division would be willing to accept to transfer 10,000 units to the Pump Division?(2 marks

5- At this price, would Pump Division accept the transfer? (1 mark

6- 1)Is it in the best interest of Carter for the transfer to occur?Show all supporting calculations.(4 marks)