Division S produces a component that is used by Division B. Division Ss unit costs of manufacturing the component are: Direct materials $60; Direct labor $16; Variable overhead $20; Fixed overhead $24 (based on a practical volume of 250,000 components).

Division S also incurs these costs: fixed selling & administrative $1,200,000, and variable selling $4/unit.

Division S expects to sell only 200,000 components next year. The variable selling expenses are avoidable if the component is sold internally.

Division B has been buying the same component from an external supplier for $160 each. It expects to use 40,000 units of the component next year. The manager of Division B has offered to buy 40,000 units from Division S for $112 each.

The maximum transfer price should be:

a.	$120	c.	$96
b.	$160	d.	$76

Refer to question 14. Suppose Divisions S and B agree on a transfer price of $112. What is the benefit to each division respectively?

a.	$640,000/$1,920,000	c.	$1,920,000/$640,000
b.	$2,560,000,/$0	d.	$0/$2,560,000