In Cases 1 to 3 below.assume that Division A has a product that can be sold either to Division 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 intemal transfers. All transfer prices are negotiated. Treat each case independently Case 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: Number of units needed annually Purchase price now being paid to an outside supplier 50, eee 50,000 le $ 53 $ 25 nors 300.000 300,000 $ 40 $ 19 $ 8 100,000 75,000 $ 60 $ 35 $ 17 200,000 200,000 $ 45 $ 30 $ 6 10, see $ 92 70,000 39 20,000 60 60,000 $ 5 "Before any purchase discount Required: 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. What is the minimum transfer price for cien A Required: 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? mints Minimum transfer price Book Print feroncon b. What is the maximum transfer price for Division B? Maximum transfer price c. Will the managers agree to a transfer? Prev 1 of 2 BE Next Ch c. Will the managers agree to a transfer? O Yes O No 3. Refer to Case 3. Assume that Division B is now receiving a 5% price discount from the outside supplier. a-1. What is the minimum transfer price for Division A? Minimum transfer price a-2. What is the range of transfer price the manager's of both divisions should agree? The transfer price can be a lowest of and a highest of 1-2 What is the range of transfer price the manager's of both divinions should agree? The price can be as lowest of who who a-3. It is assumed that managers are co-operative and understand their own business, Will the managers agree to a transfer? Yes No Prey 1 of 2 Next >