Collyer Products Inc. has a Valve Dision that manufactures and sells standard volve as follows: Capacity in units 250,000 selling price to outsidnetomers on the intermediate market Yixed cost per unit (based on exposity The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 22,000 valves per year from an overseas supplier at a cost of $16 per valve 1. Assume that the Valve Division has ample Idle capacity to handle all of the Pump Division's needs. What is the acceptable range, If any, for the transfer price between the two divisions? Transfer price 2. Assume that the Valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions? Transfer price 3 In each of the cases below, assume that Division X has a product that can be sold elther to outside customers or to Division of the same company for use in its production process. The managers of the divisions are evaluated based on the divisional profits: Case Division Xt Capacity in unita Number of units being sold to outside customers Selling price per unit to outside customer Variable costa per unit Fixed conta per unit (based on capacity) Division : Number of units needed for production Purchase price per unit now being paid to an outside supplier 220,000 220.000 220,000 196,000 362 $30 $32 810 24,000 24,000 059 #46 Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division Transfer price 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-a. Refer to the data in case B above. In this case there will be no reduction in variable selling costs on intracompany sales. Determine the transfer price of the selling division. Transfer price 2-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-c. What is the range of transfer price the managers of both divisions should agree? and a highest of The transfer price can be a lowest of