Problem 19-49 (Algo) Transfer Pricing; Decision Making [LO 19-4] 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 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 100,000 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 costs are $980,000 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 35 Fixed 15 Total marketing costs 50 Operating income per unit $ 140