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Hrubec Products has just acquired a small company that manufactures paper cartons. Hrubec plans to treat its newly acquifed Carton Division as a profit center. The manager of the Carton Division is currently purchasing 6.900 tons of pulp per year from a supplier at a cost of $101 per ton. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if the managers of the two divisions can negotiate an acceptable transfer price. Required: For (1) and (2) below, assume the Pulp Division can sell all of its pulp to outside customers for $108 per ton. 1. What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptable transfer price? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer pike for 6,900 tons of pulp next year? 2. If the Puip Division meets the price that the Carton Division is currently paying to its supplier and sells 6.900 tons of pulp to the Carton Division each yeat, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole? For (3)-(6) below, assume that the Pulp Division is curcently seiling only 30,000 tons of pulp each year to outside customers at the stated \$108 price. 3. What is the Pulp Division's lowest acceptable transter price? What is the Carton Division's highest acceptable transfer pice? What is the range of acceptable transfer prices (if ony) between the fwo divisions? Are the managers of the Carton and Pulp Divisions tikely to voluntanly agree to a transfer pice for 6,900 tons of polp next yeer? 4a. Suppose the Carton Division's outside supplier dirops its price to only $97 per ton. Should the Pulp Division meet this price? 4.b. If the Pulp Division does not meet the $97 price, what will be the eflect on the profits of the company as a whole? 5. Refer to (4) above. If the Pulp Division refuses to meet the $97 pice, should the Carton Division be required ta purchase from the Pulp Division ot a higher price for the good of the company as a whole? 6 Refer to (4) above. Assume that due to inflexible management policles. the Carton Division is required to purchase 6,900 tons of pulp each year from the Pulp Division at $108 per ton. What will be the effect on the profits of the compary as a whole

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