Case 11-26 (Algo) Transfer Pricing; Divisional Performance [LO11-3] Weller industries is a decentralized organization with six divisions. The company's Electrical Division produces a variety of electrical Items, Including an X52 electrical fitting. The Electrical Division (which is operating at capacity) selis this fitting to its regular customers for $7.80 each; the fiting has a variable manufacturing cost of $4.35. The company's Brake Division has asked the Electrical Division to supply it with a large quantity of X 52 fittings for only $5.80 each. The Brake Division, which is operating at 50% of capacity, will put the fiting into a brake unit that it will produce and sell to a large commerclal alrine manufacturer. The cost of the brake unit being built by the Brake Division follows: Although the $5.80 price for the X52 fitting represents a substantial discount from the regular $7.80 price, the manager of the Brake Division belleves the price concession is necessary if his division is to get the controct for the airplane brake units. He has heard Through the grapevine" that the airplane manufacturer plans to reject his bid if it is more than $52 per brake unit. Thus, if the Brake Division is forced to pay the regular $780 price for the 52 fiting. it will either not get the contract or it will suffer a substantial ioss at a time when it is already operating at only 50% of capacity. The manager of the Brake Divfion argues that the price concession is imperative to the well-being of both his division and the company as a whole. Weller industries uses return on investment (RO) to measure divisional performance. Required: 1. Assume that you are the manager of the Electrical Division. a. What is the lowest acceptable transfer price for the Electrical Division? b. Would you supply the 52 fitting to the Brake. Division for $5.80 each as requested? 2. Assuming the alrplane brakes can be sold for $52, what is the financlal advantoge (disadvantage) for the compary as a whole (on a per unit basis) if the Electrical Division supplles fittings to the Brake Division? 3. In principle, within what range would the transfer price lie? (For all requlrements, enter your "Financial Disadvantage" amounts as a negative value and round your final answers to 2 decimal placesi)