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Problem 2: Transfer Pricing [15POINTSJ Division A manufactures plastic tubes. The tubes can be sold to Division B of the same company or to outside customers. Last year, the following activity was recorded in Division A: Selling price per tube P125 Production cost per tube P120, 75% of which is variable Normal capacity and actual production during the year 20,000 tubes Number of tubes sold outside of the company 16,000 tubes Sold to division 3 4,000 tubes. Sales to division B were at the same price as sales to outside customers. Division B incurred P300 in additional cost per unit and then sold the final product for P600 each. Requirements: 1. 2. 3. Assume that Division A's manufacturing capacity is 20,000 tubes per year. Next year, Division B wants to purchase 5,000 tu bes rather than only 4,000 in the last year. {Tubes of this type is not available from outside sources] From the standpoint of the company as a whole, should Division A sell the 1,000 additional tubes to Division B, or should it continue to sell to outside customers? Show the effect in the Income statement Assume that Division A is able to sell all 20,000 tubes to outside customers at P175 per tube. Next year, Division B'sproduction requirement is 6,000 units. Another company offered to supply a similar product to Division B at P110 per tube. Howr much is the minimum acceptable transfer price of Division A? Assume that Division A is able to sell all 17,000 tubes to outside customers at P125 per tube. Next year, Division mproduction requirement is 6,000 units. Another company offered to supply a similar product to Division B at P110 per tube. How much is the minimum acceptable transfer price of Division Aand the maximum acceptable transfer price for Division B