Division $Y$ has asked Division $x$ of the same company to supply it with $6,000$ units of part L$763$ this year to use

in one of its products. Division $Y$ has received a bid from an outside supplier for the parts at a price of $$38$ per

unit. Division $x$ has the capacity to produce $24,000$ units of part $L763$ per year. Division $x$ expects to sell $21,600$

units of part $L763$ to outside customers this year at a price of $$40\mathrm{.}00$ per unit. To fill the order from Division $Y,$

Division $x$ would have to cut back its sales to outside customers. Division $x$ produces part $L763$ at a variable

cost of $$30$ per unit. The cost of packing and shipping the parts for outside customers is $$2$ per unit. These

packing and shipping costs would not have to be incurred on sales of the parts to Division $Y.$

Required:

a$.$ What is the range of transfer prices within which both the Divisions' profits would increase as a result of

agreeing to the transfer of $6,000$ parts this year from Division $x$ to Division $Y?$

Note: Round your final answers to $2$ decimal places.

b$.$ Is it in the best interests of the overall company for this transfer to take place?

Yes

NoDivision Y has asked Division X of the same company to supply it with $6,000$ units of part L$763$ this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $$38$ per unit. Division X has the capacity to produce $24,000$ units of part L$763$ per year. Division X expects to sell $21,600$ units of part L$763$ to outside customers this year at a price of $$40\mathrm{.}00$ per unit. To fill the order from Division Y$,$ Division X would have to cut back its sales to outside customers. Division X produces part L$763$ at a variable cost of $$30$ per unit. The cost of packing and shipping the parts for outside customers is $$2$ per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y$.$

Required:

What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of $6,000$ parts this year from Division X to Division Y$?$

Note: Round your final answers to $2$ decimal places.

Is it in the best interests of the overall company for this transfer to take place?

multiple choice

Yes

No