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San Leandro Hydraulics has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 65,000 Selling price to outside $98 per unit customers Variable cost $36 per unit Fixed cost per unit (based on capacity) $44 The Pool Products Division is currently purchasing 10,000 of these pumps per year from an international supplier at a cost of $94 per pump. Assume Pump Division is selling all the pumps it can produce to outside customers. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier? Yes, both divisions are always better off when there is internal trade regardless of whether the selling division has enough idle capacity to handle all the buying division's needs. POLO Yes, the minimum transfer price the selling division should be willing to accept is less than the maximum transfer price the buying division should be willing to $98 per unit Selling price to outside customers Variable cost per unit Fixed cost per unit (based on capacity) $36 $44 The Pool Products Division is currently purchasing 10,000 of these pumps per year from an international supplier at a cost of $94 per pump. Assume Pump Division is selling all the pumps it can produce to outside customers. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier? Yes, both divisions are always better off when there is internal trade regardless of whether the selling division has enough idle capacity to handle all the buying! division's needs. Yes, the minimum transfer price the selling division should be willing to accept is less than the maximum transfer price the buying division should be willing to pay. No, the minimum transfer price the selling division should be willing to accept! exceeds the maximum transfer price the buying division should be willing to pay. The answer cannot be determined from the information provided

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