Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division B uses in the production of its product. Variable cost per widget is $1.20; full cost is $1.90. Comparable widgets sell on the open market for $2.50 each. Division A can produce up to 2.30 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 115,000 widgets in the current year. Required: 1. Determine the minimum and maximum transfer prices. (Enter your answers to 2 decimal places.)

Minimum Transfer Price
Maximum Transfer Price

2. Calculate Tulip Companys total benefit of having the widgets transferred between these divisions.

Total Benefit

3. If the transfer price is set at $1.20 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. (Round your answers to 2 decimal places.)

Division A Profit		per Unit
Division B Savings		per Unit

4. If the transfer price is set at $2.50 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. (Round your answers to 2 decimal places.)

Division A Profit		per Unit
Division B Savings		per Unit

5. What transfer price would you recommend to split the difference? (Round your answer to 3 decimal places.)

Mutually Beneficial Transfer Price