Muharraq Co., has Division A that manufactures and sells a number of parts, including Part XYZ. Data concerning Part XYZ appear below:

Capacity in units

Selling price to outside customers

Variable cost per unit

Fixed cost per unit (based on capacity)

70.000

$ 110

$ 75

$ 25

10 points

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The company has Division B that could use Part XYZ in one of its products. Division B is currently purchasing 15,000 of Part XYZ per year from an overseas supplier at a cost of $109 per part.

Required:

a. Assume that Division A is selling all of Part XYZ it can produce to outside cuStomers. What is the acceptable range, if any, for the transfer price between the two divisions? [4 marks]

b. Assume again that Division A is selling all of Part XYZ it can produce to outside customers. Also assume that $3 in variable expenses can be avoided on transfers within the company due to reduced shipping an

selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? [4 marks]

c. Based on requirement (a), assume Division A offers to sell 15,000 units to Division B for $125 and that Division B refuses this price. What will be the loss in potential profits for Division A? (2 marks]

to gants Mulana C, he Division A dat manus and sells amber of puns, including Part XYZ Dancing Part XV Capacity in uns Selling price to outside customer Variable cost per un 70,000 $110. $75 Fixed cost per welt (based on capacity) The company has Division B that could use Pet XYZ in one of its products Divisios B is currently purchasing 15,000 of Part XYZ per year from an overspplier a cost of $100 per p Required: a. Assume that Division A is selling all of Part XYZ it can produce to outside coltomers. What is the acceptable range, if any, for the transfer price between the two divisions? (4 marks) b. Assume again that Division A is selling all of Part XYZ it can produce to outside customers. Also assume that $3 in variable expenses can be avoided on transfers within the company due to reduced shipping, now selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? (4 marks] c. Based on requirement (a), assume Division A offers to sell 15,000 units to Division B for $125 and that Division B refuses this price. What will be the loss in potential profits for Division A? [2 marks] For the toolbar, press ALT F10 (PC) or ALT4FN+F10 (Mac)