Giants Inc. has two divisions, A and B, that manufacture baby bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Required: 1. What is the minimum transfer price at which Division A manager would be willing to sell intermediate product to Division B? (3 marks) 2. What is the maximum transfer price at which Division B would be willing to purchase intermediate product from Division A? (3 marks) Now suppose that the Division A can sell only 70% of its output capacity of 30,000 intermediate product per month on open market. Capacity cannot be reduced in the short run. Division B can assemble and sell more than 30,000 bicycles per month. 3. What is the minimum transfer price at which Division A manager would be willing to sell intermediate product to Division B? (4 marks) 4. From the point of view of Giants management, how much of Division A output should be transferred to Division B? (4 marks) Giants Inc. has two divisions, A and B, that manufacture baby bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Required: 1. What is the minimum transfer price at which Division A manager would be willing to sell intermediate product to Division B? (3 marks) 2. What is the maximum transfer price at which Division B would be willing to purchase intermediate product from Division A? (3 marks) Now suppose that the Division A can sell only 70% of its output capacity of 30,000 intermediate product per month on open market. Capacity cannot be reduced in the short run. Division B can assemble and sell more than 30,000 bicycles per month. 3. What is the minimum transfer price at which Division A manager would be willing to sell intermediate product to Division B? (4 marks) 4. From the point of view of Giants management, how much of Division A output should be transferred to Division B? (4 marks)