Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2. The following data are available from last month:

Division 1:

Selling price per wheel to outside customers...............................................................$50

Variable cost per wheel when sold to outside customers............................................$35

Capacity in wheels......................................................................................................15,000

Divison 2

Number of wheels needed per month.........................................................................5,000

Price per wheel paid to an outside supplier.................................................................$47

If Division 1 sells the wheels to Divison 2, Division 1 can avoid $2 per wheel in sales commissions.

a. Suppose that Division 1 sells 7,500 units per month to outside customers. What is the lowest acceptable transfer price from the viewpoint of the selling division if Division 2 requires 5,000 units per month from Division 1?

b. What is the maximum price per wheel that Division 2 should be willing to pay Division 1 if a transfer were to take place?

c. Suppose that Division 1 sells 15,000 units each month to outside customers, what is the lowest acceptable transfer price from the viewpoint of the selling division?