Jackson's company is a leading manufacturer and distributor of electronic musical instruments, including keyboards and synthesizers. Jackson is a decentralized organization that has several divisions, with each division being a profit center. Division A of Jackson manufactures electronic circuit boards. The boards can be sold either to Jackson's Group Z or to outside customers. Group D's manufacturing capacity is 30,000 circuit boards.

During 2019, the following activity occurred at Group D:

Selling price per circuit board: $190

Variable Cost per circuit board: $80

Fixed Cost per circuit board: $75

Number of circuit boards:

Produced during the year : 30,000

Sold to outside customers: 25,000

Sold to division B: 5,000

Sales to Group Z were at the same price as sales to outside customers. The circuit boards purchased by Group Z were used in an electronic instrument manufactured by that group (one board per instrument). Group Z incurred $100 in additional variable cost per instrument, had an allocated fixed cost of $25 per instrument, and then sold the instruments for $400 each. Show your calculations and relevant units.

a. Calculate the net operating incomes earned by Group's D and Z.

b. Calculate the net operating incomes earned by the company as a whole:

Assume now that in the follow year, Group Z wants to purchase 7,5000 circuit boards from Group D rather than 5,000. (Circuit boards of this type are not available from outside sources.)

c. From the standpoint of the company as a whole, should Group D sell the 2,500 additional circuit boards to Group Z or continue to sell them to outside customers?

d. If the groups managers are negotiating the transfer price, what is the range of acceptable transfer prices? Assume group Z fixed costs are avoidable if no production take place at Group Z.

e. If the groups managers are negotiating the transfer price, what is the range of acceptable transfer prices? Assume group Z fixed costs are unavoidable even if no production take place at Group Z