The Transformer division of Lorman Industries produces transformers that can be sold to outside customers or transferred to the Electronics division of the company. The following information has been collected by Lorman's controller:
| Production capacity | 100,000 units |
| Selling price | $60 per unit |
| Variable production cost | $36 per unit |
| Variable selling cost | $4 per unit |
Electronics need 6,000 transformers. If the Transformer division transfers its units to the Electronics division, it can avoid $2 of the variable selling cost.
Required:
| a. | If the Transformer division can only sell 80,000 units to outside customers, what is |
the lowest acceptable transfer price that it is willing to accept for the 6,000 units?
| b. | If the Transformer division can sell all 100,000 units to outside customers, list three |
courses of action that the division might consider providing the units to Electronics.
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