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  3. in each of the cases below, assume that division x

In each of the cases below, assume that Division x has a product...

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Accounting

In each of the cases below, assume that Division x has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits:
Division Y :
Number of units needed for production
Purchase price per unit now being paid to an outside supplier
${:[25,000,25,000]5,50,$
Required:
1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division.
Transfer price
1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place?
Yes
No
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