Phoenix Incorporated, 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 50,000 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 $580,000

Income per Unit for Division A (assuming parts purchased externally, not internally from division B) Required: 1. Division A proposes to buy 25,000 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 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? 3. What is the range of transfer prices over which the divisional managers might negotiate a final transfer price? 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