Letang Company has three divisions (R, S, and T), organized as decentralized prot centres. Division R produces the basic chemical Ranbax (in multiples of 1,000 pounds) and transfers it to Divisions S and T. Division S processes Ranbax into the nal product Syntex. and Division T processes Ranbax into the nal product Tennix. No material is lost during processing. Division R has no xed costs. The variable cost per pound of Ranbax is $0.24. Division R has a capacity limit of 10,000 pounds. Divisions S and T have capacity limits of 4,000 and 6,000 pounds, respectively. Divisions S and T sell their nal product in separate markets. The company keeps no inventories of any kind. The cumulative net revenues (i.e., total revenues - total processing costs) for divisions S and T at various output levels are summarized below. a (Click the icon to view the cumulative net revenues.) Muired Requirement 1. Suppose there is no external market for Ranbax. What quantity of Ranbax should the Letang Company produce to maximize overall income? How should this quantity be allocated between the two processing divisions? Letang should produce [1 pounds of Ranbax. They should allocate |:| pounds of Ranbax to Division S and [1 pounds of Ranbax to Division T. Requirement 2. What range of transfer prices will motivate Divisions S and T to demand the quantities that maximize overall income (as determined in requirement 1), as well as motivate Division R to produce the sum of those quantities? (Enter the amounts in ascending order.) The transfer price must lie between $ and $ Requirement 3. Suppose that Division R can sell any quantity of Ranbax in a perfectly competitive market for $0.33 a pound. To maximize Letang's income, how many pounds of Ranbax should Division R transfer to Divisions S and T, and how much should it sell in the external market? Letang should produce pounds of Ranbax. They should allocate 3 pounds of Ranbax to Division S, pounds of Ranbax to Division T, and pounds to the external market. Requirement 4. What range of transfer prices will result in Divisions R, S, and T mking the actions determined as optimal in requirement 3? Explain your answer. The transfer price must lie between $ and $ . If the market is truly competitive, however, Divisions S and T can also purchase Ranbax externally for $ , so there is a unique optimal transfer price, which is $ Cumulative net revenues Division S Pounds of Ranbax processed in S 1,000 2,000 3,000 4,000 Total net revenues ($) from sale of Syntex $ 600 $ 1,050 $ 1,350 $ 1,550 Division T Pounds of Ranbax processed in T 1,000 2,000 3,000 4,000 5,000 6,000 Total net revenues ($) from sale of Termix 500 $ 1,000 $ 1,500 $ 1,750 $ 1,850 $ 1,900