Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division , Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 500,000 components at a variable cost of $6.00 and a full cost of $10.00. Iron Products has outside sales of 470,000 components at a price of $12.50 per unit. Austin currently purchases 40,000 units from an outside supplier at a price of $12.00 per unit. Assume that Austin desires to use a single supplier for its component. a . What will be the effect on Rapid Industries' operating profit if the transfer is made internally? Assume the 40,000 units Austin needs are either purchased 100% internally or 100% externally. What is the minimum transfer price? What is the maximum transfer price?
