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			$	24
Expenses:
Variable	$	14
Fixed (based on a capacity of 95,000 tons per year)		6		20
Net operating income			$	4

Hrubec Products has just acquired a small company that manufactures paper cartons. Hrubec plans to treat its newly acquired Carton Division as a profit center. The manager of the Carton Division is currently purchasing 29,000 tons of pulp per year from a supplier at a cost of $21.60 per ton. Hrubecs president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if the managers of the two divisions can negotiate an acceptable transfer price.

Required:

For (1) and (2) below, assume the Pulp Division can sell all of its pulp to outside customers for $24 per ton.

1. What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptable transfer price? 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 29,000 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 29,000 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?

6. Refer to (4) above. Assume that due to inflexible management policies, the Carton Division is required to purchase 29,000 tons of pulp each year from the Pulp Division at $24 per ton. What will be the effect on the profits of the company as a whole?

Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3 Req 4A Req 4B Reg 5 Reg 6 What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptable transfer price? 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 29,000 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): There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below. 24 X Transfer price $ $ 22 Are the managers likely to voluntarily agree to a transfer price for 29,000 tons of pulp next year? Yes No Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3 Req 4A Req 4B Reg 5 Reg 6 If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 29,000 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 round intermediate calculations.) a. decrease by Profits of the Pulp Division will Profits of the Carton Division will Profits of the company as a whole will $ 69,600 0 remain unchanged . c. by > > decrease by $ 76,800 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4A Req 4B Reg 5 Reg 6 Refer to (4). Assume that due to inflexible management policies, the Carton Division is required to purchase 29,000 tons of pulp each year from the Pulp Division at $24 per ton. What will be the effect on the profits of the company as a whole? The company as a whole will have an) increase in profit by $ 150,000