Division A has a product that can be sold either to outside market or Division B of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. CASE Division A: 1 2 3 Capacity in units 100,00 0 90,000 100,00 0 80,000 Number of units being sold to outside customers Selling price per unit outside customers Variable cost per unit Fixed cost per unit based on capacity 100,00 0 100,00 0 $60 $45 $10 $55 $40 $8 $50 $30 $6 Division B: Number of units needed for production 20,000 20,000 20,000 Purchase price per unit now being paid to an outside supplier $56 $53 $48 Required: 1. Refer to the data in case 1 above. Assume in this case that $5 per unit in variable selling cost can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? a. If so, within what range will the transfer price fall? Explain and show your calculation! b. If not so, and means no transfer price on intracompany, make a calculation of income statement briefly related amount of net operating income (loss) that be obtained from division A! 2. Refer to the data in case 2 above. In this case, there will be no saving in variable selling cost can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? If so, within what range will the transfer price fall? Explain and show your calculation! 3. Refer to the data in case 3 above. In this case, there will be no saving in variable selling cost can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? a. If so, within what range will the transfer price fall? Explain your answer and also calculate the net operating income of division A in case 3! b. If all products that be bought by the division B from transfer price negotiated at $ 35 per unit, and these products will be processed further with additional variable cost $7 per unit. The selling price of ultimate product at $ 61 per unit. Prepare income statement of division B briefly based on additional data above (3a only)