Jefferson Motors, Inc., operates as a decentralized multidivision company. The Vala division of Jefferson Motors purchases most of its airbags from the airbag division. The airbag division's incremental cost for manufacturing the airbags is $100 per unit. The airbag division is currently working at 85% of capacity. The current market price of the airbags is $160 per unit.

Requirements:

1.	What is the minimum price at which the airbag division would sell airbags to the Vala division?
2.	Suppose that Jefferson Motors requires that whenever divisions with unused capacity sell productsinternally, they must do so at the incremental cost. Evaluate this transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomy.
3.	If the two divisions were to negotiate a transfer price, what is the range of possible transfer prices? Evaluate this negotiated transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomy.
4.	Instead of allowing negotiation, suppose that Jefferson specifies a hybrid transfer price that "splits the difference" between the minimum and maximum prices from the divisions' standpoint. What would be the resulting transfer price for airbags?