Question: Looking for explanations on how to solve A and B below. thank you! The Assembly Division of American Car Company has offered to purchase 90,000

Looking for explanations on how to solve A and B below. thank you!

The Assembly Division of American Car Company has offered to purchase 90,000 batteries from the Electrical Divison for $104 per unit. Currently, Electrical Division is producing 250,000 batteries per year and the production costs per battery are as follows:

Electrical Division:

Direct materials, $40 Direct labor, 20 Variable factory overhead, 12 Fixed factory overhead, 40 Total, $ 112

The Electrical Division has been selling 250,000 batteries per year to outside buyers at $136 each. Capacity is 250,000 batteries per year. The Assembly Division has been buying batteries from outside sources for $130 each.

A. How would I determine the transfer price range?

B. How would I deterime the following: From the company's perspective, if a transfer is made, how much more or less will firm profits be?

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