2) A corporation has a segment, Division A that sells a part on the outside market for $120.Its costs, based on a unit capacity of 200,000 units, are $25 variable and $45 fixed.The company has a related segment, Division B that could use the part in its own assembly operations.Division B buys the part from another supplier for $112, and it will need 40,000 units.

Required: 1) Assume division A is selling 140,000 units to outside customers.

a)From the standpoint of Division A, what is the lowest acceptable transfer price for units sold to Division B?

b)From the standpoint of Division B, what is the highest acceptable transfer price for units purchased from Division A.

c)If left to bargain freely, would you expect the division managers to voluntarily agree on a transfer of units from Division A to Division B?Give reasons.

d)From the standpoint of the entire company, should the transfer take place?Give reasons.

e) Now assume Division A is selling all its capacity to outside customers.Answer a through d under this new condition.