Division A has a product that can be sold either to outside market or Division of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. CASE Dis: 1 2 Capacity in its 100.000 100.000 100,000 Number of units being sold 100000 90,000 80,000 to outside customer Selling price per unit $55 outside customers Variable cost per unit based $45 $40 530 on capacity Fived count based S10 S S6 en capacity Divis Number of units needed for 30,000 20:00 20,000 production Purchase price per unit 556 $33 S48 being paid to an outside supplier . Required: 1. Refer to the data in case I above. Assume in this case that $5 per unit in variable selling cost can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? a. If so, within what range will the transfer price fall? Explain and show your calculation! b. If not so, and means no transfer price on intracompany, make a calculation of income statement briefly related amount of net operating income (loss) that be obtained from division A! 2. Refer to the data in case 2 above. In this case, there will be no saving in variable selling cost can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? If so, within what range will the transfer price fall? Explain and show your calculation! 3. Refer to the data in case 3 above. In this case, there will be no saving in variable selling cost can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? a. If so, within what range will the transfer price fall? Explain your answer and also calculate the net operating income of division A in case 3! b. If all products that be bought by the division B from transfer price negotiated at S 35 per unit, and these products will be processed further with additional variable cost $7 per unit. The selling price of ultimate product at S 61 per unit. Prepare income statement of division B briefly based on additional data above (3a only)