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

200,000

200,000

Number of units being sold to outside customers

200,000

160,000

Selling price per unit to outside customers

$90

$75

Variable costs per unit

$70

$60

Fixed costs per unit (based on capacity)

$13

$8

Division Y:

Number of units needed for production

40,000

40,000

Purchase price per unit now being paid to an outside supplier

$86

$74

Incomplete as follows:

Required:

1-a.	Refer to the data in case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales.

Variable cost per unit	70
Less: Avoidable cost	3	67
Total contribution margin on lost sales
No. of units transferred		0
Transfer price		67