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Question - A Manufacturing company that currently operates with two divisions: Condo and Crate. The Condo division currently manufactures a product that the Crate division purchases from an outside supplier. The Crate division needs 30,000 units each year, and pays the outside supplier $30 per unit. Condo division's variable manufacturing cost is $15 per unit and has the capacity to manufacture 55,000 units per year. Currently Condo has only produces and sells 35,000 units per year at a selling price of $36 per unit.
Required -
A) What is the minimum and maximum transfer prices.
B) Assume that the managers of both divisions agree on a transfer price of $34 per unit. Calculate the incremental income of each division if a transfer of 30,000 units is done.
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