Exercise 11-3 (Algo) Transfer Pricing Basics (LO11-3) 25,000 Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products Sales and cost data on the speaker follow Selling price per unit on the Intermediate market 5.68 Variable costs per unit 5.50 Fixed costs per unit (based on capacity) 50 Capacity in units Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year . It has received a quote of $65 per speaker from another manufacturer Sako Company evaluates division managers on the basis of divisional profits Required: 1. Assume the Audio Division sellis only 20,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? if left free to negotiate without interference would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the H-Fi Division? d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling 22,500 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the H-F Division? b. From the standpoint of the H-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? if left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? 3. Assume the Audio Division is selling 25,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? Answer is not complete Complete this question by entering your answers in the tabs below. Reg 1A and 18 Reg 1C Reg 10 Reg 2A and 28 Req 2C Req 2D Reg 3A and 3B Reg 3C Reg 3D From the standpoint of the entire company, should the transfer take place? Assume the Audio Division is selling 25,000 speakers per year to outside customers. Transfer should take place Transfer should not take place