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AquaAqua

Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of

$8080

per screen. The SD can sell all its output to the outside market at a price of

$105105

per screen, after incurring a variable marketing and distribution cost of

$66

per screen. If the AD purchases screens from outside suppliers at a price of

$105105

per screen, it will incur a variable purchasing cost of

$88

per screen.

AquaAqua's

division managers can act autonomously to maximize their own division's operating income.

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Question content area bottom

Part 1

Requirement 1. What is the minimum transfer price at which the SD manager would be willing to sell screens to the AD?

Incremental cost per screen	+	Opportunity cost per screen	=	Minimum transfer price
$80	+	$19	=	$99

Part 2

Requirement 2. What is the maximum transfer price at which the AD manager would be willing to purchase screens from the SD?

	+		=	Maximum transfer price
	+		=