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Fyodor Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Machine Division
Fyodor Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Machine Division has asked the Parts Division to provide it with special parts each year. The special parts would require $ per unit in variable production costs.
The Machine Division has a bid from an outside supplier for the special parts at $ per unit. In order to have time and space to produce the special'part, the Parts Divistion would have to cut back production of another partthe QR that it presently is producing. The QR sells for $ per unit and requires $ per unit in variable production costs. Packaging and shipping costs of the QR are $ per unit. Packaging and shipping costs for the new special part would be only $ per unit. The Parts Division is now producing and selling units of the QR each year. Production and sales of the QR would drop by if the new special part is produced for the Machine Division.
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 special parts per year from the Parts Division to the Machine Division?
Note: Round your final answers to decimal places.
Answer is complete but not entirely correct.
Range of transfer prices:
Transfer
price
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