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Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division's management is compensated based on the division's operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that it sells to outside customers-but not to division A at this time. Division A's manager approaches division B's manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit. Relevant Information about Division B Sells 87,500 units of equipment to outside customers at $130 per unit Operating capacity is currently 80%; the division can operate at 100% Variable manufacturing costs are $70 per unit Variable marketing costs are $8 per unit Fixed manufacturing costs are $880,000 Income per Unit for Division A (assuming parts purchased externally, not internally from division B) 320 Sales revenue Manufacturing costs: Cellular equipment Other materials Fixed costs Total manufacturing costs Gross margin Marketing costs: Variable Fixed Total marketing costs Operating income per unit 80 10 40 130 190 35 15 50 $140 Requlred 1. Division A wants to buy 40,000 units from division B at $75 per unit. Determine the contribution margin for each type sale by division B. Should division B accept or reject the proposal? How would your answer differ if (a) division A requires all 40,000 units in the order to be shipped by the same supplier and what would be the net operating loss or gain to division B and the firm as a whole, or (b) division A would accept partial shipment from division B and what would be the benefit from this alternative to division B? 2. What is the range of transfer prices over which the divisional managers might negotiate a final transfer price? ts Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 2 Division A wants to buy 40,000 units from division B at $75 per unit. Determine the contribution margin for each type sale by division B. Should division B accept or reject the proposal? IsI Outside 130 Selling Price Less: Variable costs per unit Less: Variable marketing costs Contribution Margin Should division B accept or reject the proposal? 60 70 52 Reject Req 1A Req 1B> Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 2 How would your answer differ if division A requires all 40,000 units in the order to be shipped by the same supplier and what would be the net operating loss or gain to division B and the firm as a whole? Division A requires all 40,000 units Net operating profitloss to Division B. Total Contribution Forgone contribution of not selling to outside consumers $ 600,000 $ 600,000 Net operating profitloss to the firm as a whole: Savings to the firm if Division A buys all 40,000 units Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 2 How would your answer differ if division A would accept partial shipment from division B and what would be the benefit from this alternative to division B? Total capacity of division B Maximum sales possible to outside consumers Remaining Capacity Contribution per unit Total Contribution or benefit from this alternative Req 1B Req 2 Complete this question by entering your answers in the tabs below. Req 2 Req 1A What is the range of transfer prices over which the divisional managers might negotiate a final transfer price? The range of transfer price Req 1B Req 1C S-600 to- $ 800 K Req 1C Req 2