Question: * Question 3 Larkspur has two divisions - Division A manufactures compressors and Division B uses compressors to make air conditioners. Each division operates as

* Question 3 Larkspur has two divisions - Division A manufactures

* Question 3 Larkspur has two divisions - Division A manufactures compressors and Division B uses compressors to make air conditioners. Each division operates as a profit centre and is free to buy and sell products internally and externally. The revenue and cost of a compressor is shown below: Capacity Selling price to external customers Direct Materials Direct Labours Variable Manufacturing Costs Fixed Manufacturing Costs (based on capacity) 18,600 $176 19 59 10 46 Division B currently purchases 7,440 compressors from Division A at full cost. A salesperson approached Division B and offered to sell the compressors at $120. The manager of Division B is negotiating the price with the manager of Division A. If Division A operates at 50% of its capacity and can produce 7,440 compressors for Division B, what is the range of the transfer price, if any? If you were the manager of Division A, what transfer price would you offer the manager of Division B? (Enter 0 if there is no transfer price.) Minimum

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