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Slaven & Company has a division that manufactures a widget that sells for $120 and has a variable cost of $80. Another division of the
Slaven & Company has a division that manufactures a widget that sells for $120 and has a variable cost of $80. Another division of the company uses this widget when assembling its product. This division is currently purchasing this component from an outside company for $118. This division is considering purchasing 10,000 widgets from the internal division. If the sale takes place internally, the selling division could save $5 per unit in shipping costs. 1. If the selling division is at full capacity (selling all units it can make) the minimum price the seller would accept is $115. 2. The maximum price the buyer will be willing to pay is $118. 3. If the selling division is at full capacity (selling all units it can make) and a transfer price of $116 is set, the PARENT Company's (Slaven & Company) net income will increase by $30,000 if the internal transfer takes place. O Both Statement #1 and #2 are true All of the Statements are true Only Statement #1 is true Only Statement #3 is true o Only Statement #2 is true O Both Statement #1 and #3 are true Both Statement #2 and #3 are true
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