Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow:

Selling price			$	21
Expenses:
Variable	$	11
Fixed (based on a capacity of 96,000 tons per year)		6		17
Net operating income			$	4

Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 30,000 tons of pulp per year from a supplier at a cost of $21 per ton, less a 10% purchase discount. Hrubecs president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out.

Required:

For (1) and (2) below, assume the Pulp Division can sell all of its pulp to outside customers for $21 per ton.

1. What is the lowest acceptable transfer price from the perspective of the Pulp Division? What is the highest acceptable transfer price from the perspective of the Carton Division? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year?

2. If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 30,000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole?

For (3) below, assume that the Pulp Division is currently selling only 55,000 tons of pulp each year to outside customers at the stated $21 price.

3. What is the lowest acceptable transfer price from the perspective of the Pulp Division? What is the highest acceptable transfer price from the perspective of the Carton Division? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year?

Pictures below are for required (1.) (2.) (3.)

Req 6 Req 1 Req 2 Req 5 Req 3 Req 4A Req 4B What is the lowest acceptable transfer price from the perspective of the Pulp Division? What is the highest acceptable transfer price from the perspective of the Carton Division? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? (Round "Maximum transfer price" answer to 1 decimal place.) Show less Identify the range of acceptable transfer prices (if any): OThere is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below: 2 Transfer price 2 Are the managers likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? OYes ONo Req 3 Req 4A Req 4B Req 5 Req 6 Req 1 Req 2 If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 30,000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole? (Do not intermediate calculations.) a. Profits of the Pulp Division will b. Profits of the Carton Division will c. Profits of the company as a whole will by by by Req 4A Req 48 Req 6 Req 1 Req 2 Req 3 Req 5 What is the lowest acceptable transfer price from the perspective of the Pulp Division? What is the highest acceptable transfer price from the perspective of the Carton Division? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? (Round your answers to nearest whole dollar amount.) Show less Identify the lowest and highest acceptable transfer prices: Lowest acceptable transfer price Highest acceptable transfer price Identify the range of acceptable transfer prices (if any): OThere is not a range of acceptable transfer prices. OThere is a range of acceptable transfer prices as shown below: s Transfer price Are the managers likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? OYes ONo