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 110,000 110,000 110,000 88,000 $51 $36 $30 $21 $9 $7 22,000 22,000 $48 $35 Required: 1-a. Refer to the data in case A above. Assume that $2 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 ONo 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 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