Managerial Accountants: Consider the independent cases 1-3 below, assume that Segment J has a product that can be sold either to Segment K of the same company or to outside customers. The managers of both divisions are evaluated based on their own divisions return on investment (ROI). The managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated. Treat each case independently.

	Case
	1	2	3	4
Segment J:
Capacity in units	52,000	282,000	110,000	192,000
Number of units now being sold to outside customers	52,000	282,000	85,000	192,000
Selling price per unit to outside customers	$97	$45	$67	$47
Variable costs per unit	$61	$25	$41	$32
Fixed costs per unit (based on capacity)	$20	$14	$25	$8
Segment K:
Number of units needed annually	10,400	72,000	19,000	62,000
Purchase price now being paid to an outside supplier*	$88	$45	$67

* Before any purchasediscount.

Required:
1.	Refer to case 1. A study has indicated that Segment J can avoid $5 per unit in variable costs on any sales to Segment K.

a.	What is the minimum transfer price for Segment J? (Omit the "$" sign in your response.)

Minimum transfer price

$

b.	What is the maximum transfer price for Segment K? (Omit the "$" sign in your response.)

Maximum transfer price

$

c.	Will the managers agree to a transfer?

	No
	Yes

2.	Refer to case 2. Assume that Segment J can avoid $4 per unit in variable costs on any sales to Segment K.

a-1.	What is the minimum transfer price for Segment J? (Omit the "$" sign in your response.)

Minimum transfer price

$

a-2.	What is the maximum transfer price for Segment K? (Omit the "$" sign in your response.)

Maximum transfer price

$

a-3.

Would you expect any disagreement between the two divisional managers over what the transfer price should be?

	No
	Yes

b.	Assume that Segment J offers to sell 72,000 units to Segment K for $44 per unit and that Segment K refuses this price. What will be the loss in potential profits for the company as a whole? (Input the amount as a positive value. Omit the "$" sign in your response.)

Loss in potential profits for the company

$

3.	Refer to case 3. Assume that Segment K is now receiving a 4% price discount from the outside supplier.

a-1.	What is the minimum transfer price for Segment J? (Omit the "$" sign in your response.)

Minimum transfer price

$

a-2.	What is the range of transfer price the manager's of both divisions should agree? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

The transfer price can be a lowest of $ and a highest of $ .

a-3.

Will the managers agree to a transfer?

	Yes
	No

b.	Assume that Segment K offers to purchase 19,000 units from Segment J at $59.32 per unit. If Segment J accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?

Segment J's ROI should

(Click to select)unchangeddecreaseincrease

4.

Refer to case 4. Assume that Segment K wants Segment J to provide it with 62,000 units of a different product from the one that Segment J is now producing. The new product would require $26 per unit in variable costs and would require that Segment J cut back production of its present product by 31,000 units annually. What is the lowest acceptable transfer price from Segment J's perspective? (Round your intermediate and final answers to 2 decimal places. Omit the "$" sign in your response.)

Transfer price

$