Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 500,000 components at a variable cost of $6.50 and a full cost of $8.50. Iron Products has outside sales of 446,000 components at a price of $12.50 per unit. Austin currently purchases 60,000 units from an outside supplier at a price of $11.50 per unit. Assume that Austin desires to use a single supplier for its component.What will be the effect on Rapid Industries' operating profit if the transfer is made internally? Assume the 60,000 units Austin needs are either purchased 100% internally or 100% externally. What is the minimum transfer price? maximum transfer price?

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To analyze the effect of the internal transfer of components from Iron Products to Austin within Rap... View the full answer