Division Y has asked Division X of the same company to supply it with 7600 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $46.00 per unit. Division X has the capacity to produce 30,400 units of part L763 per year. Division X expects to sell 27,360 units of part L763 to outside customers this year at a price of $49.60 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $38 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y.Required:a. What is the
range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 7600 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.)Range of transfer prices?< Transfer price < ?b. Is it in the best interests of the overall company for this transfer to take place?
A. No
B. Yes
Answer: B
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Fill in the blank(s) with the appropriate word(s).
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