Phoenix company’s 2017 master budget included the following fixed budget report. it is based on an expected production and sales volume of 15,000 units. phoenix companyfixed budget reportfor year ended december 31, 2017sales $3,150,000cost of goods sold direct materials $945,000 direct labor 225,000 machinery repairs (variable cost) 45,000 depreciation—plant equipment (straight-line)300,000 utilities ($45,000 is variable) 195,000 plant management salaries 200,000 1,910,000gross profit 1,240,000selling expenses packaging 90,000 shipping 105,000 sales salary (fixed annual amount) 235,000 430,000general and administrative expenses advertising expense 125,000 salaries 230,000 entertainment expense 85,000 440,000income from operations $370,000the company’s business conditions are improving. one possible result is a sales volume of 18,000 units. the company president is confident that this volume is within the relevant range of existing capacity. how much would operating income increase over the 2017 budgeted amount of $415,000 if this level is reached without increasing capacity?

In each of the cases below, assume division x has a product that can be sold either to outside customers or to division y of the same company for use in its production process. the managers of the divisions are evaluated based on their divisional profits. case a b division x: capacity in units 200,000 200,000 number of units being sold to outside customers 200,000 160,000 selling price per unit to outside customers $ 90 $ 75 variable costs per unit $ 70 $ 60 fixed costs per unit (based on capacity) $ 13 $ 8 division y: number of units needed for production 40,000 40,000 purchase price per unit now being paid to an outside supplier $ 86 $ 74 required: 1. refer to the data in case a above. assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. what is the lowest acceptable transfer price from the perspective of the selling division? b. what is the highest acceptable transfer price from the perspective of the buying division? c. what is the range of acceptable transfer prices (if any) between the two divisions? if the managers are free to negotiate and make decisions on their own, will a transfer probably take place?