Phoenix Incorporated, a cellular communication company, has multiple business units, organized as divisions. Each division's management is compensated based on the division's 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 customers-but not to Division A at this time. Division A's manager approaches Divislon B's 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 varlable manufacturing costs of $60 per unit Relevant Information about Disision B Sells 70,000 units of equipment to outside customers at $130 per unit. Operating capacity is currently 80%; the division can operate at 100% Varlable manufacturing costs are $70 per unit Varlable marketing costs are $8 per unit Fixed manufacturlng costs are $740,000 Income per Unit for Division A (assuming parts purchased externally, not internally from division B) Required: 1. Division A proposes to buy 35,000 units from Division B at $75 per unit. What would be the effect of accepting this proposal on Division B's operating Income? What would be the effect on the operating income of Phoenix Incorporated as a whole? 2. Now suppose Division A could purchase from multiple suppliers and would accept partlalshipment from Division B. How many units should Division B sell to Division A at $75 per unit, If any? What would be the effect on Division B's operating Income? What would be the effect on the operating income of Phoenix Incorporated as a whole? 3. What is the range of transfer prices over which the divisional managers might negotlate a final transfer price? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Division A proposes to buy 35,000 units from Division B at $75 per unit. What would be the effect of accepting this proposal on Division B's operating income? What would be the effect on the operating income of Phoenix Incorporated as a whole? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Now suppose Division A could purchase from multiple suppliers and would accept partialshipment from Division B. How many units should Division B sell to Division A at $75 per unit, if any? What would be the effect on Division B's operating income? What would be the effect on the operating income of Phoenix Incorporated as a whole? Phoenix Incorporated, a cellular communication company, has multiple business units, organized as divisions. Each division's management is compensated based on the division's 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 customers-but not to Division A at this time. Division A's manager approaches Divislon B's 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 varlable manufacturing costs of $60 per unit Relevant Information about Disision B Sells 70,000 units of equipment to outside customers at $130 per unit. Operating capacity is currently 80%; the division can operate at 100% Varlable manufacturing costs are $70 per unit Varlable marketing costs are $8 per unit Fixed manufacturlng costs are $740,000 Income per Unit for Division A (assuming parts purchased externally, not internally from division B) Required: 1. Division A proposes to buy 35,000 units from Division B at $75 per unit. What would be the effect of accepting this proposal on Division B's operating Income? What would be the effect on the operating income of Phoenix Incorporated as a whole? 2. Now suppose Division A could purchase from multiple suppliers and would accept partlalshipment from Division B. How many units should Division B sell to Division A at $75 per unit, If any? What would be the effect on Division B's operating Income? What would be the effect on the operating income of Phoenix Incorporated as a whole? 3. What is the range of transfer prices over which the divisional managers might negotlate a final transfer price? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Division A proposes to buy 35,000 units from Division B at $75 per unit. What would be the effect of accepting this proposal on Division B's operating income? What would be the effect on the operating income of Phoenix Incorporated as a whole? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Now suppose Division A could purchase from multiple suppliers and would accept partialshipment from Division B. How many units should Division B sell to Division A at $75 per unit, if any? What would be the effect on Division B's operating income? What would be the effect on the operating income of Phoenix Incorporated as a whole
