Case Refer to case 1. A study has indicated that Division A can avoid $6 per uni

Question

Case

Refer to case 1. A study has indicated that Division A can avoid $6 per unit in variable costs on any sales to Division B.

What is the maximum transfer price for Division B? (Omit the "$" sign in your response.)

Refer to case 2. Assume that Division A can avoid $5 per unit in variable costs on any sales to Division B.

What is the minimum transfer price for Division A? (Omit the "$" sign in your response.)

What is the maximum transfer price for Division B? (Omit the "$" sign in your response.)

Case

1 2 3 4   Division A:     Capacity in units 50,000   285,000   105,000    205,000       Number of units now being sold to outside
    customers 50,000   285,000   79,000    205,000       Selling price per unit to outside customers $97   $42   $64    $46       Variable costs per unit $59   $19   $39    $32       Fixed costs per unit (based on capacity) $20   $12   $21    $7     Division B:     Number of units needed annually 10,300   71,000   22,000    64,000       Purchase price now being paid to an outside
    supplier* $87 $40   $64    —

Explanation / Answer

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