Word Wizard is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a separate profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned by Word Wizard, as well as authors under contract with other companies. The printing operation bills out at $0.01per page, and a typical book requires440pages of print. A manager from Business Books, one of the Word Wizard's book lines, has approached the manager of the printing operation offering to pay $0.007per page for1,500copies of a440 page book. The book line pays outside printers $0.008per page. The printing operation's variable cost per page is $0.003.

Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the following situations.

(a)

Assume that the printing operation is booked solid for the next 2 years, and it would have to cancel an obligation with an outside customer in order to meet the needs of the internal division.(RoundTransfer priceto 2 decimal places, e.g. 0.18.)

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(b)

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Your answer is partially correct.

Assume that the printing operation has available capacity.(RoundTransfer priceto 3 decimal places, e.g. 0.189.)

Printing should be done

Internally

Externally