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 $1.35; full cost is $2.20. Comparable widgets sell on the open market for $2.90 each. Division A can produce up to 2.60 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 130,000 widgets in the current year.

Required:

1. Determine the minimum and maximum transfer prices.

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

3. If the transfer price is set at $1.35 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.)

4. If the transfer price is set at $2.90 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.)

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