n each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits.

	Case
	A	B
Division X:
Capacity in units	200,000	200,000
Number of units being sold to outside customers	200,000	160,000
Selling price per unit to outside customers	$90	$75
Variable costs per unit	$70	$60
Fixed costs per unit (based on capacity)	$13	$8
Division Y:
Number of units needed for production	40,000	40,000
Purchase price per unit now being paid to an outside supplier	$86	$74

Required:

1-a.

Refer to the data in case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales.

Answer is not complete as follows:

Variable cost per unit	70
Less: Avoidable cost		70
Total contribution margin on lost sales
No. of units transferred		0
Transfer price		70