XYZ Co has two divisions, X and Y. Division X makes a component for washing machines which it can only sell to Division Y. It has no other outlet for sales. Current information relating to Division X is as follows: Marginal cost per unit $1000 Transfer price of the component $1650 Total production and sales of the component each year 2,200 units Specific fixed costs of Division X per year $100,000 ABC has offered to sell the component to Division Y for $1400 per unit. If Division Y accepts this offer, Division X will be closed. 

1. What is the minimum and maximum transfer price? 

2. What will happen to XYZ’s profits if Division Y accepts the supplier’s offer and Division X is closed? 

3. Assuming that Division Y buys from the outside supplier the facilities currently used to produce the component can be used to produce another product which will result in a contribution margin of $75,000. Division X cannot manufacture the component and produce the other product at the same time. What is the minimum transfer price?