Dexter Manufacturing makes a variety of products, including lawn mowers. Dexter's Lawn Mower Division can use a component, K32, manufactured by Dexter's Electrical Division. The market price for K32 is $17 per unit. The variable cost per unit for K32 in the Electrical Division is $8, while the absorption cost per unit is $13. The divisions at Dexter use a negotiated price strategy to set transfer prices between divisions. The Electrical Division has excess capacity.
What is the lowest acceptable transfer price to the Electrical Division? What is the highest acceptable transfer price that the Lawn Mower Division would pay? Explain your answer.