Check my work 11 Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division's management is compensated based on the division's operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that it sells to outside customers-but not to division A at this time. Division A's manager approaches division B's manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit. 0.3 points Relevant Information about Division B eBook Sells 97,500 units of equipment to outside customers at $130 per unit Operating capacity is currently 80%; the division can operate at 100% Variable manufacturing costs are $70 per unit Variable marketing costs are $8 per unit Fixed manufacturing costs are $960,000 References Income per Unit for Division A (assuming parts purchased externally, not internally from division B) Req 2 Req 1A Req 1B Req 10 Division A wants to buy 44,000 units from division B at $75 per unit. Determine the contribution margin for each type sale by division B. Should division B accept or reject the proposal? To Division A Outside Selling Price Contribution Margin Should division B accept or reject the proposal? Req 2 Req 1A Req 1B Req 1C How would your answer differ if division A requires all 44,000 units in the order to be shipped by the same supplier and what would be the net operating loss or gain to division B and the firm as a whole? Division A requires all 44,000 units Net operating profit/loss to Division B: Total Contribution Forgone contribution of not selling to outside consumers Net operating profit/loss to the firm as whole: Savings to the firm if Division A buys all 44,000 units Req 2 Req 1A Req 1B Req 1C How would your answer differ if division A would accept partial shipment from division B and what would be the benefit from this alternative to division B? Total capacity of division B Maximum sales possible to outside consumers Remaining Capacity Contribution per unit Total Contribution or benefit from this alternative Req 1A Req 1B Req 10 Req 2 What is the range of transfer prices over which the divisional managers might negotiate a final transfer price? The range of transfer price to Req 1C Reg 2