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Assume the Small Components Division of Martin Manufacturing produces a video card used in the assembly of a variety of electronic products. (Click the icon to view additional information.) Read the requirements. Requirement 1. What is the highest acceptable transfer price for the divisions? The highest acceptable transfer price for the divisions is the Small Components Division's market price $ 38 Requirement 2. Assuming the transfer price is negotiated between the divisions of the company, what would be the lowest acceptable transfer price? Assume variable selling expenses pertain to outside sales only. The lowest acceptable transfer price for the divisions is the Small Components Division's variable costs $ 22 Requirement 3. Which transfer price would the manager of the Small Components Division prefer? Which transfer price would the manager of the Computer Division prefer? The manager of the Small Components Division would prefer a transfer price of The manager of the Computer Division would prefer a transfer price of Cost per unit Direct materials $ 9.00 Direct labor $ 5.00 $ 8.00 Variable manufacturing overhead Fixed manufacturing overhead (at current production level) Variable selling expenses $ 11.00 $ 10.00 The Computer Division of Martin Manufacturing can use the video card produced by the Small Components Division and is interested in purchasing the video card in-house rather than buying it from an outside supplier. The Small Components Division has sufficient excess capacity with which to make the extra video cards. Because of competition, the market price for this video card is $38 regardless of whether the video card is produced by Martin Manufacturing or another company

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