Consider the following data concerning a subassembly that Willamette Manufacturing Company produces in its fabricating division and uses in products assembled in its assembly division.

If you were the manager of the fabricating division, what is the lowest transfer price you would accept for the subassembly? If you were the manager of the assembly division, what is the most you would be willing to pay for the subassembly? Is there a transfer price that would motivate production and transfer of the subassembly? If so, what is the price?

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Fabricating division Variable cost of subassembly Excess capacity (in units) Assembly division Market price for buying the subassembly from external sources Number of units needed €35 1,000 €50 900