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Phoenix Inc.. 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 it sells to outside customersbut 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 87,500 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 costs are $880900 Income per Unit for Division A (assuming parts purchased externally, not internally from division B) Sales revenue SB 328 Manufacturing costs: Cellular equipment so Other materials 18 Fixed costs 40 Total manufacturing costs 130 Gross margin 198 Ma rketing costs: \\Ia ria ble 3 5 Fixed 15 Total marketing costs 58 Operating income per unit $ 140 ' Required: 1. Division A wants to buy 43,750 units from Division B at $75 per unit. Should Division B accept or reject the proposal to sell the 43.750 units? (a). Calculate the net operating prot or loss to Division B and to the firm as a whole ifthe 43,750 units are sold to Division A. (b.) Calculate the net benet to the firm as a whole if Division A will accept a partial shipment from Division B. 2. What is the range of transfer prices over which the divisional managers might negotiate a nal transfer price? 0 Answer is not complete. Complete this quation by entering your answers in the tabs below. Rea 1 Rea 1A Req 1B Rea 2 Division A wants to buy 43,750 units from Division B at $75 per unit. Calculate the net operating profit or loss to Division B and to the rm as a whole if the 43,750 units are sold to Division A. DIVIsmn A requires all 43,750 units Net operating prot/loss to Division B Total Contribution $ 600,000 942,500 0 $ (342,500) Forgone contribution of not selling to outside consumers Net operating loss to division B Net operating prot/loss to the rm as a whole: Savrngs to the rm if Divrslon A buys all 43,750 units Opportunity cost of loss sales Net loss to the rm Phoenix lnc.. 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 it sells to outside customersbut 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 87,500 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 costs are $880000 Income per Unit for Division A (assuming parts purchased externally. not internally from division B) Sales revenue $ 326 Manufacturing costs: Cellular equipment so Other materials 16 Fixed costs 46 Total manufacturing costs 138 Gross margin 198 Marketing costs: Variable 35 Fixed 15 Total marketing costs 56 Operating income per unit $ 149 Required: 1. Division A wants to buy 43,750 units from Division B at $75 per unit. Should Division B accept or reject the proposal to sell the 43,750 units? (a). Calculate the net operating prot or loss to Division B and to the firm as a whole ifthe 43,750 units are so d to Division A. (b.) Calculate the net benet to the rm as a whole if Division A will accept a partial shipment from Division B. 2. What is the range of transfer prices over which the divisional managers might negotiate a nal transfer price? 6 Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 1A Req lB Req 2 Division A wants to buy 43,750 units from Division B at $75 per unit. Calculate the net benet to the rm as a whole if Division A will accept a partial shipment from Division B. Total capacity of diVision B 125,000 a xjigumngamrssales possible to outside 100,000 a Remaining Capacity 21,875 0 Savings per unit $ 15 o Total benet from this alternative $ 32,815 0