(LO 15-2) 15-25. Evaluate Transfer Pricing System Southwest Division offers its product to outside markets for $30. It incurs variable costs of $11 per unit and fixed costs of $37,500 per month based on monthly production of 4,000 units. Northeast Division can acquire the product from an alternate supplier for $31 per unit or from Southwest Division for a transfer price of $30 plus $2 per unit in transportation costs. Required a. What are the costs and benefits of the alternatives available to Southwest Division and Northeast Division with respect to the transfer of Southwest Division's product? Assume that Southwest Division can market all that it can produce. b. How would your answer change if Southwest Division had idle capacity sufficient to cover all of Northeast Division's needs? B E F G H I K L M N A Ex. 15-25 C D Evaluate Transfer Pricing System 2 3 Northeast Southwest Company a. Transfer intemally Pays Receives Pays Pays Pays Pays 4 5 6 7 8 9 10 11 12 13 14 Sell externally Pays Receives Pays Pays Pays Pays Optimal 15 b. Northeast Southwest 16 17 Company Transfer internally Pays 18 Receives Pays Pays Pays Pays Sell externally Pays Receives and pays Pays 19 20 21 22 23 24 25 26 27 Optimal