Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each divisions management is compensated based on the divisions operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that it sells to outside customersbut not to division A at this time. Division As manager approaches division Bs manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit. Relevant Information about Division B Sells 80,000 units of equipment to outside customers at $130 per unit Operating capacity is currently 80%; the division can operate at 100% Variable manufacturing costs are $70 per unit Variable marketing costs are $8 per unit Fixed manufacturing costs are $820,000 Income per Unit for Division A (assuming parts purchased externally, not internally from division B) Sales revenue $ 320 Manufacturing costs: Cellular equipment 80 Other materials 10 Fixed costs 40 Total manufacturing costs 130 Gross margin 190 Marketing costs: Variable 35 Fixed 15 Total marketing costs 50 Operating income per unit $ 140 Required: 1. Division A wants to buy 40,000 units from Division B at $75 per unit. Should Division B accept or reject the proposal to sell the 40,000 units? (a). Calculate the net operating profit or loss to Division B and to the firm as a whole if the 40,000 units are sold to Division A. (b.) Calculate the net benefit to the firm as a whole if Division A will accept a partial shipment from Division B. 2. What is the range of transfer prices over which the divisional managers might negotiate a final transfer price?