Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 520,000 components at a variable cost of $6.00 and a full cost of $9.00. Iron Products has outside sales of 478,000 components at a price of $14.00 per unit. Austin currently purchases 50,000 units from an outside supplier at a price of $11.00 per unit. Assume that Austin desires to use a single supplier for its component.

Required:

What will be the effect on Rapid Industries operating profit if the transfer is made internally? Assume the 50,000 units Austin needs are either purchased 100% internally or 100% externally.

What is the minimum transfer price?

What is the maximum transfer price?