Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units Selling price to outside customers Variable cost per unit Fixed cost per unit (based on capacity) 60,000 $ 71 $ 25 $ 28 The Pool Products Division is currently purchasing 13,000 of these pumps per year from an overseas supplier at a cost of $66 per pump. Assume that the Pump Division is selling all of the pumps it can produce to outside customers. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier? Multiple Choice Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs. Yes, the minimum transfer price that the selling division should be willing to accept division should be willing to accept. less than the maximum transfer price that the buying The answer cannot be determined from the information that has been provided. No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept. 2 Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: Capacity in units Selling price to outside customers Variable cost per unit Fixed cost per unit (based on capacity) 45,000 $ 35 $ 11 $ 21 The Electronics Division is currently purchasing 6,300 of these relays per year from an overseas supplier at a cost of $32 per relay. Assume that the Relay Division is selling all of the relays it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. Does there exist a transfer price that would make both the Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier? Multiple Choice No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier. The answer cannot be determined from the information that has been provided. Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept. Both divisions would be financially better off if the transfers were to take place. Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs