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	93,000	106,000
Number of units being sold to outside customers	93,000	84,000
Selling price per unit to outside customers	$52	$33
Variable costs per unit	$28	$20
Fixed costs per unit (based on capacity)	$8	$5
Division Y:
Number of units needed for production	22,000	22,000
Purchase price per unit now being paid to an outside supplier	$46	$40

1) Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany sales.

2) If the managers are free to negotiate and make decisions on their own, will a transfer take place? ( A. True ) ( B. False )