Problem 19-49 (Algo) Transfer Pricing: Decision Making [LO 19-4] Phoenix incorperated, a celular communication company, has multple business units, organized as divisions. Each division's management is compensated based on the division's operating income. Divisian A currenty purchases celliblar equipment from outside matkets and uses it to peoduce communication systems. Division B produces similat cellular equipment that it sells to outsidie customers -but not to Division A at this time. Diwision A's manager approaches Division Bs maneger with a proposal to buy the equipment from Division E. If Th produces the cellular equipment that Division A desires, Division B will incur variable manulacturing costs of $60 per unit. Relevant information about Division 8] Selis 55,000 unts of equipment to outside custamers at $130 per uns Operating capocity is currently 80%; the division can operate at 100% Variable manufacturing costs are $70 per unit Voriable markoting costs are $8 per unit. Fixod monufacturing costs are $620.000 Required: 1. Division A proposes to buy 27,500 units from Division 8 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 Divislon B's operatling 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? Complete this question by entering your answers in the tabs below. Division A proposes to buy 27,500 units from Division 8 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