In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Case A B Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier 300,000 300,000 $ 70 $45 $12 300,000 268,000 $53 $25 $10 32,000 32,000 $65 $52 Required: 1-a. Refer to the data in case A above. Assume that $4 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. Transfer price 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes 2-a. Refer to the data in case B above. In this case there will be no reduction in variable selling costs on intracompany sales. Determine the transfer price of the selling division. Transfer price 2-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-c. What is the range of transfer price the managers of both divisions should agree? The transfer price can be a lowest of and a highest of