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The Windshield division of Fast Car Co. makes windshields for use in Fast Car's Assembly division. The Windshield division incurs variable costs of $216 per windshield and has capacity to make 630,000 windshields per year. The market price is $530 per windshield. The Windshield division incurs total fixed costs of $3,750,000 per year.
Problem 1: If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions?
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