Two Wheel Green Machines manufactures and sells bicycles. The tire manufacturing division

sells its product to customers for $$15$ each. The variable cost per tire is $$7\mathrm{.}50,$ and fixed costs per

tire are $$3\mathrm{.}00.$ The bicycle assembly division has been buying tires from an outside source for $$13$

each. Upper management wants the tire division to transfer $50,000$ tires to the assembly division

within the company at a price of $$12$ per tire. The tire division is operating at full capacity.

 

 

Tasks: Answer the following questions:

a$)$ What is the minimum transfer price?

b$)$ What is the maximum transfer price?

c$)$ How much will the tire manufacturing division gain$/$lose by selling its tires at a set transfer price of $$12$ per tire?

d$)$ How much will the assembly division gain$/$lose by buying the tire at a set transfer price of $$12$ per tire?