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 $$1\mathrm{.}45$; full cost is $$2\mathrm{.}40.$ Comparable widgets sell on the open market for $$3\mathrm{.}10$ each. Division A can produce up to $2\mathrm{.}80$ million widgets per year but is currently operating at only $50$ percent capacity. Division B expects to use $140,000$ widgets in the current year.

Required:

Determine the minimum and maximum transfer prices.

Calculate Tulip Company$$s total benefit of having the widgets transferred between these divisions.

If the transfer price is set at $$1\mathrm{.}45$ 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.

If the transfer price is set at $$3\mathrm{.}10$ 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.

What transfer price would you recommend to split the difference?