For the sake of performance evaluation, Motorela is split into various sections Motorela's Automobile Division buys the majority of its transmission systems from another division of the firm The incremental cost of producing a conventional transmission in the Transmission Division is about $1,350 per unit The division is currently working at 75 of capacity The current market price for a standard transmission is approximately $1,875 Transmission Divisions Incremental Unit Cost $1 350 External Market Price per Unit $1 875 REQUIRED What is the minimum price (to the nearest whole dollar) at which the Transmission Division would sell its output to the Automobile Division Justify your price in your answer (5 Marks) If the two divisions of Motorela were to negotiate a transfer price, what are the lower and upper amounts (to the nearest whole dollar) of the likely range of prices Provide justifications for both limits of your price

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Question: For the sake of performance evaluation, Motorela is split into various sections. Motorela's Automobile Division buys the majority of its transmission systems from another division

For the sake of performance evaluation, Motorela is split into various sections. Motorela's Automobile Division buys the majority of its transmission systems from another division of the firm. The incremental cost of producing a conventional transmission in the Transmission Division is about $1,350 per unit. The division is currently working at 75% of capacity. The current market price for a standard transmission is approximately $1,875.

Transmission Divisions Incremental Unit Cost	$1 350
External Market Price per Unit	$1 875

REQUIRED:

What is the minimum price (to the nearest whole dollar) at which the Transmission Division would sell its output to the Automobile Division? Justify your price in your answer. (5 Marks)

If the two divisions of Motorela were to negotiate a transfer price, what are the lower and upper amounts (to the nearest whole dollar) of the likely range of prices? Provide justifications for both limits of your price.

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