Division a of Spangler Company Expects the Following Results Division B Has the Opportunity to Buy the 5,000 Units

Essay

Division A of Spangler Company expects the following results:
$\begin{array}{lcc}&\text { To Division B} &&\text {To Outsiders }\\ \text {Sales}(5,000 \times \$ 60)&\$300,000\\(\$ 25,000 \times \$ 72) & & \$ & 1,500,000\\\text { Variable costs at } \$ 36 &\underline{ 180,000} &&\underline{ 900,000 }\\ \text { Contribution margin } & \$ 120,000& \$ & 900,000 \\ \begin{array}{l}\text { Fixed costs, all common, allocated on the basis of} \\\text { relative units }\end{array} &\underline{ 60,000} & & \underline{300,000} \\ \text { profit } & \$60,000 & \$ & 600,000 \\\end{array}$
Division B has the opportunity to buy the 5,000 units it needs from an outside supplier at $45 each. Assume that Division A cannot increase sales to outsiders.
Required:
(a) What would be the optimal transfer price?
(b) Assume that Spangler allows the divisional managers to negotiate transfer prices. What would the maximum transfer price be?
(c) Assume that Spangler allows the divisional managers to negotiate transfer prices. What would the minimum transfer price be?