Phoenix Incorporated, a cellular communication company, has multiple business units, organized as divisions. Each division's management is compensated based on the division's operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that is sells to outside customers, but not to division A, at this time. Division A's manager approaches division B's manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit. Relevant information about division B: Sells 85,000 units of equipment to outside customers at $130 per unit. Operating capacity is currently 80%; the division can operate at 100%. Variable manufacturing costs are $70 per unit. Variable marketing costs are $8 per unit. Fixed manufacturing cost are $860,000. Income per unit for division A (assuming parts purchased externally, not internally from division B.) Sales revenue $320 Manufacturing costs: Cellular Equipment $80, Other Materials $10, Fixed costs $40. Total manufacturing costs $130. Gross margin $190. Marketing costs: Variable costs $35, Fixed costs $15, Total manufacturing costs $50, Operating Income per unit $140. Required: 1.) Division A proposes to buy 42,500 units from division B at $75 per unit. What would be the affect of accepting this proposal on division B's operating income? What would be the affect on the operating income of Phoenix Incorporated as a whole? 2. Now suppose division A could purchase from the multiple suppliers and would accept partial shipment from division B. How many units should division B sell to division A at $75 per unit, if any? What would be the affect on division B's operating income? What would be the effect on the operating income of Phoenix Incorporated as a whole? 3. What is the range of transfer prices over which the divisional managers might negotiate a final transfer price