# Section X manufactures a product used by many manufacturers. Here are the sales and cost data for

## Question:

Section X manufactures a product used by many manufacturers. Here are the sales and cost data for the product: Selling price per unit in the middle market: $77 Variable cost per unit: $32 Fixed cost per unit (based on production capacity): $4 Maximum production capacity in units (per year): 30,000 units

The company has just established a new Y section that could use this product in one of its products. They will need 8,000 units per year. Another manufacturer offers them a price of $75 per unit.

Assuming that X currently manufactures and sells 28,000 units per year to outside customers in the middle market, and that the variable cost per unit incurred by X remains unchanged if it sells to Y, the transfer price range within which the managers of the two sections could agree is between :

a) No response is appropriate

b) a minimum price of $32 and a maximum price of $75

c) a minimum price of $65.75 and a maximum price of $77

d) a minimum price of $65.75 and a maximum price of $57

e) a minimum price of $75 and a maximum price of $77