VI. (24 points) A transportation equipment manufacturer is heavily decentralized. Each division head has full authority on all decisions regarding sales to internal or external customers. Division D has always acquired a certain equipment component from Division P. However, when informed that Division P was increasing its unit price to $200, Division D's management decided to purchase the component from an outside supplier at a price of $195. Division P had recently acquired some specialized equipment that was used primarily to make this component. The manager cited the resulting high depreciation charges as the justification for the price boost. She asked the president of the company to instruct Division D to buy from P at the $200 price. She supplied the following: D's annual purchases of component P's variable costs per unit P's fixed costs per unit 1000 units $190 $ 20 For question 1-3, assume that Division P has excess capacity so there are no alternative uses for P's facilities. 1. What is the net advantage or disadvantage to Division P of selling the units to division D at the market price of $195? 2. What is the net advantage or disadvantage of the firm of having D buy internally at a price of $200? at a price of $220? 3. Suppose the president replies to Division manager P, "I will not interfere in this matter. There is no problem of goal congruence." Give evidence to support the president's position