The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $32 per unit. Variable costs for the casing are $12 per unit and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 15,000 units to the Assembly Division at a price of $24 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $27.

Required:

1. What is the price most profitable to the Molding division? Explain why.

2. What is the price most profitable to the Assembly division? Explain why.