Becker Company has two divisions, Hawley and Rollag. Hawley produces an item that Rollag could use in its production. Rollag currently is purchasing 22,000 units from an outside supplier for $14 per unit. Hawley is currently operating at less than its rated capacity of 600,000 units and has variable costs of $7 per unit. The full cost to manufacture the unit is $12. Hawley currently sells 450,000 units at a selling price of $19 per unit.
- What will be the effect on Becker Company's operating profit if the transfer is made internally?
- What is the minimum transfer price from Hawley's perspective?
- What is the maximum transfer price from Rollag's perspective?