The Fabricating division makes a component part that the Assembly division needs for a new product. The Fabricating divisions variable cost of manufacturing the component is $20 per unit. The component is also available on the open market at a price of $50 per unit. The Assembly division needs 900 units per year, and the Fabricating division has excess capacity of 1,000 units.

(a) Calculate the cost-based transfer price that the Fabricating division should charge the Assembly division. Cost based transfer price $

(b) Calculate the market-based transfer price that the Fabricating division should charge the Assembly division. Market based tranfer price $

(c) What arguments would the Fabricating division manager and the Assembly division's manager make in an attempt to get the price each wants?