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Division A makes shells. The company has sufficient capacity to make 70,000 shells per year. The company expects to sell 65,000 shells this year. Division
Division A makes shells. The company has sufficient capacity to make 70,000 shells per year. The company expects to sell 65,000 shells this year. Division B uses shells in their production and has cotal needs of 20,000 shells this year. Division B is presently buying shells from an outside supplier For $11.25 each. The cost to Division A to make the shells are $5.00 for direct materials, $2.00 for direct labor, $2.50 for variable manufacturing overhead, and $1.50 for fixed manufacturing overhead. Division A sells shells on the outside market for $11.50 each. 1. Assuming that Division B buys its entire 20,000 requirement of shells from Division A, determine the range of acceptable transfer prices. 2. Assuming that Division B buys only 5,000 shells from Division A, determine the range of acceptable transfer prices
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