2 Division Z of a company produces a component that it currently sells to outside customers for P20 per unit. At its current level of production, which is 60% of capacity, Division Z’s fixed cost of...

Division Z of a company produces a component that it currently sells to outside customers for P20 per unit. At its current level of production, which is 60% of capacity, Division Z’s fixed cost of producing this component is P5 per unit and its variable cost is P12 per unit. Division Y of the same company would like to purchase this component from Division Z for P10. Division Z has enough excess capacity to fill Division Y’s requirements. The managers of both divisions are compensated based upon reported profits. Which of the following transfer prices will maximize total company profits and be most equitable to the managers of Division Y and Division Z?

Group of answer choices