The American Battery Company has two divisions, the Electrical Division and the Assembly Division. Both divisions have the full authority to make purchasing and selling decisions of their division output to both outsiders and the other division. (A highly decentralized structure) Each Division operates as a separate profit center and is being evaluated on the basis of the divisions reported profit. The Electrical Division makes the battery cores (inside components) of the battery, and the Assembly Division places those cores in a decorative customized casing to sell to customers. The Electrical Division capacity is 350,000 cores which are sold to both outside parties and the Assembly Division. They can sell the core to outsiders for $150 per unit. The production costs per battery incurred by the Electrical Division are as follows: Direct materials $ 40 Direct manufacturing labor 30 Variable factory overhead 12 Fixed factory overhead 40 Total $122 The Assembly Division can buy the cores from an outside source for $145. The division adds $25 of incremental costs, and then sells the assembled battery for $190.

QUESTION:

Assuming the Electrical Division is running at full capacity, and the Assembly Division needs 100,000 cores, what is the minimum and maximum price respectively that the cores should be sold by the Electrical Division to the Assembly Division? A) $82 minimum and $145 maximum. B) $150 minimum and $145 maximum C) $122 minimum and $165 maximum D) $150 minimum and $165 maximum