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Case 1 2 3 4 Division A: Capacity in units 50,000 285,000 105,000 205,000 Number of units now being sold to outside customers 50,000 285,000

Case

1 2 3 4
Division A:
Capacity in units 50,000 285,000 105,000 205,000
Number of units now being sold to outside customers 50,000 285,000 79,000 205,000
Selling price per unit to outside customers $97 $42 $64 $46
Variable costs per unit $59 $19 $39 $32
Fixed costs per unit (based on capacity) $20 $12 $21 $7
Division B:
Number of units needed annually 10,300 71,000 22,000 64,000
Purchase price now being paid to an outside supplier* $87 $40 $64

* Before any purchase discount.
Required:
1.

Refer to case 1. A study has indicated that Division A can avoid $6 per unit in variable costs on any sales to Division B.

a. What is the minimum transfer price for Division A? (Omit the "$" sign in your response.)

Minimum transfer price $
b.

What is the maximum transfer price for Division B? (Omit the "$" sign in your response.)

Maximum transfer price $

Refer to case 2. Assume that Division A can avoid $5 per unit in variable costs on any sales to Division B.

c.

What is the minimum transfer price for Division A? (Omit the "$" sign in your response.)

Minimum transfer price $
d.

What is the maximum transfer price for Division B? (Omit the "$" sign in your response.)

Maximum transfer price $

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