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Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

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Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $60 Variable costs per unit $42 Fixed costs per unit (based on capacity) Capacity in units $8 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 spearkers per year. It has received a quote of $57 per speaker from another manufacturer. Sako Company evaluate division managers on the basis of divsional profits. Part II (a) Assume that the Audio Divison is selling 22,000 speakers to outside customers (i.e., with partial idle capacity). From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers to be sold to HI-FI Division? (Show your answer in the following space) (b) (c) From the standpoint of the HI-FI Division, what is the highest acceptable transfer price? (Show your answer in the following space) If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? Why or why not? (Show your answer in the following space) (d) From the standpoint of the entire company, should the transfer take place? Why or why not? (Show your answer in the following space)

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