CLICCHERE TO SAVE YOUR WORK 4 D 1 Welco Company's Electrical Division produces a high-quality transformer Sales and cost data on the transformer followed Selling price per unit on the outside market 580 Variable costs per unit 550 5 Fixed costs per unit (based on capacity) $12 Capacity in units 75,000 7 Nelco Company has a Motor Division that would like to begin purchasing this transformer from the Electrical Division. The Motorsions currently purchasing 20,000 transformers each year from another company at a cost of $78 per transformer. The supplier gives the Motor Divsion a 10% discount 9 10 Required: 11 12 1. Assume that the Electrical Division is now selling 75,000 transformers each year to outside customers. Will a transfer take place? 13 14 a) Calculate the minimum and maximum transfer prices. (3 marks) 15 16 Minimum transfer price from the perspective of the 17 18 Maximum transfer price from the perspective of the 19 20 b) Are the managers of the two divisions likely to voluntarily agree to a transfer price for 20,000 transformers each year? (1 mark) 21 22 Transfer: 23 24 25 2. Now assume that the Electrical Division is currently selling 62,000 transformers to outside customers and there are $4 in variable cost Savinos on internal sales 11 TP V4 answer sheet New CHERE TO SAVE YOUR WORK Maximum transfer price from the perspective of the b) Are the managers of the two divisions likely to voluntarily agree to transfer price for 20.000 transformers each you may 21 Transfer 2. Now assume that the Electrical Division is currently selling 62,000 transformers to outside customers and there are se invariable cost savings on internal sales. 26 - Calculate the minimum and maximum transfer prices. (3 marks) 28 29 30 31 Supporting caleuations Minimum transfer price Maximum transfer price 33 34 35 36 7 -8 9 b) Are the managers of the two divisions likely to voluntarily agree to a transfer price for 20,000 transformers each year? (1 mark] Transfer: 1