In Cases 1 to 3 below, assume that Division A has a product that can be sold either to Division B of the same company or to outside customers. The managers of both divisions are evaluated based on their own division's ROI. The managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated. Treat each case independently: Division A: Capacity in units Number of units now being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division B: nces Number of units needed annually Purchase price now being paid to an outside supplier "Before any purchase discount. Required: Case 1 3 50,000 300,000 100,000 200,000 50,000 300,000 75,000 200,000 $ 100 $ 40 $ 60 $ 45 $ 63 $ 19 $ 35 $ 30 $ 25 $ 8 $ 17 $ 6 10,000 $ 92 $ 70,000 20,000 60,000 39 $ 60 1. Refer to Case 1. A study has indicated that Division A can avoid $5 per unit in variable costs on any sales to Division B. a. What is the minimum transfer price for Division A? Minimum transfer price b. What is the maximum transfer price for Division B? Maximum transfer price c. Will the managers agree to a transfer?