TB Problem Qu. 11A-96 Division Y has asked Division X of the...

Division Y has asked Division X of the same company to supply it with 6,000 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $38 per unit. Division X has the capacity to produce 24,000 units of part L763 per year. Division X expects to sell 21,600 units of part L763 to outside customers this year at a price of $40.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $30 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y.

Required:

a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 6,000 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.)

b. Is it in the best interests of the overall company for this transfer to take place?

• Yes

• No