Daytona, Inc The Paint Division Can Make 1,000,000 L Per Year and Division

Essay

Daytona, Inc. has a division that makes paint and another division that constructs subdivision houses. The paint division incurs the following costs for one litre of paint: $\begin{array}{lr}\text { Direct materials } & \$ 1.10 \\\text { Direct labour } & 1.45 \\\text { Variable overhead } & 0.90 \\\text { Fixed overhead } & 1.15\\\text { Total }&\$4.60\end{array}$ The Paint Division can make 1,000,000 L per year and is operating at capacity. The Construction Division currently buys its paint from an outside supplier for $8.20 per litre (the same price that the Paint Division receives).
Required:
A. The maximum transfer price per litre of paint is $__________________. This price is set by which of the two divisions?
B. The minimum transfer price per litre of paint is $__________________. This price is set by which of the two divisions?