Lola Metals has two decentralized divisions, Stamping and Finishing. Finishing always has purchased certain units from Stamping at

$$49$ per unit. Stamping plans to ralse the price to $$61$ per unit, the price it recelves from outside customers. As a result, Finishing is

considering buying these units from outside suppliers for $$49$ per unit. Corporate policy allows division managers to choose both

customers and suppliers regardless of the transfer price. Stamping's costs follow:

Required:

a$.$ If Finishing buys from an outside supplier, the facilities that Stamping uses to produce these units will remain Idle. What will be the

impact on corporate profits If Lola Metals enforces a transfer price of $$61$ per unit between Stamping and Finishing?

b$.$ Suppose Lola Metals enforces a transfer price of $$49$ and insists that Stamping sell to Finishing before selling to outside customers.

Stamping currently operates at capacity and can easily sell on the outside market the units it sells to Finishing. What cost will Lola

Metals incur as a result of this policy?

Complete this question by entering your answers in the tabs below.

If Finishing buys from an outside supplier, the facilities that Stamping uses to produce these

units will remain idle. What will be the impact on corporate profits if Lola Metals enforces a

transfer price of $$61$ per unit between Stamping and Finishing?