Vandermeer Products, Inc

Essay

Vandermeer Products, Inc., has a Antennae Division that manufactures and sells a number of products, including a standard antennae. Data concerning that antennae appear below:
The company has a Aircraft Products Division that could use this antennae in one of its products. The Aircraft Products Division is currently purchasing 11,000 of these antennaes per year from an overseas supplier at a cost of $88 per antennae.
Required:
a. Assume that the Antennae Division is selling all of the antennaes it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions?
b. Assume again that the Antennae Division is selling all of the antennaes it can produce to outside customers. Also assume that $1 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?