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Division A and Division B are drvissons within the same company The managers of b following information relative to two divisions Thivision A s are
Division A and Division B are drvissons within the same company The managers of b following information relative to two divisions Thivision A s are evaluated based on thear division's actas on investment (ROI) Amane the Variable costs per ut Capacity in units Number of units now being sold to outade customers Selling price per unit to outside customers 400,000 400,000 $90 $65 $15 Division B 30,000 $89 Fixed cost per unit (based on capacity) Number of units needed annually Purchase price now being paid to an outside supplier A study indicates that Division A can avoid $5 per unit in shipping costs on any sales to Division B. Required: Compute the following 1. Calculate the lowest acceptable transfer price for the seller (Division A)? 2. Calculate the highest acceptable transfer price for the buyer (Division B)? 3. Calculate the range of acceptable transfer prices between the two divisions? 4. Assume Division A offers to sell 30,000 units to Division B for $88 and that Division B refuses this price. What will be the loss in potential profits for the company as a whole and for each division
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