Problem 1 (Questions 17 - 18) Yoyodyne Propulsion Systems, Inc. has several divisions, including the Whorfin Division and the Banzai Division. Whorfin Division is located in Missoula, Montana, where the tax rate is 27.75%, and the Banzai Division is located in Cody, Wyoming, where the tax rate is 21%. Whorfin Division has been purchasing regulators from Banzai Division at the going rate of $54 per unit, but they are hoping to lower their costs. The following information is available about both divisions: Variable costs Fixed costs Market price Production capacity Demand for product Whorfin Division Product: Oscillation Overthrusters $180/unit plus cost of regulator $1,500,000 $720/unit 100,000 units 100.000 units Variable costs (including commission) Fixed costs Market price Production capacity Demand for product Banzai Division Product: Regulators $18/unit $1,500,000 $54 / unit 400,000 units 500.000 units The Banzai Division's unit variable costs include a sales commission of 10% of the selling price: this cost could be avoided if the Banzai Division could sell its goods internally. Yoyodyne's management is trying to decide whether to dictate a transfer price to the divisions or allow the divisions to negotiate a transfer price between themselves. Question 17 30 pts Calculate the transfer price if it is: Cost-based with a 10% markup Market-based with no markup The floor of the price range if the price is negotiated between the divisions The ceiling of the price range if the price is negotiated between the divisions