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: 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 $22 per ton. less a 10% purchases discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked cut. For (1) and (2) below, assume that the Pulp Division can sell all of its pulp to outside customers for $22 per ton. a. What is the minimum Transfer Price at which Pulp is willing to sell within the firm? b. What is the maximum Transfer Price at which carton is willing to buy within the firm? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tone of pulp next year? No Yes 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 below, assume that the Pulp Division is currently selling only 55,000 tons of pulp each year to outside customers at the stated $22 price. What is the minimum transfer price for Pulp Division? What is the range transfer price the manager's of both divisions should agree? Are the mangers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? No Yes Suppose that the Carton Divisions' outside supplier drops its price (net of the purchase discount 10 only $17 per ton, Should me Pulp Division meet this price) No Yes How much potential profit will the Pulp Division lose if the $17 per ion. Should the Pulp Division lose meet this price? No Yes How much potential profit will the Pulp Division lose it the $17 price is not met? Refer to above. If the Pulp Division refuses to meet the $17 poles, should the Canton Division be required to purchase from the Pulp Division at a higher price for the good of the company as a whole? Yes No Refer to (4) above, Assume that due to inflexible management polices, the Carton Division is required to purchase 30,000 tons of pulp each year from the Pulp Division at $22 per ton. What will be the effect on the profits of the company as a whole