Kingwood Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of...

1. Refer to Kingwood Corporation. What is the minimum price per unit that X Division could accept from Y Division for 5,000 units of the gear assembly and be no worse off than currently?

2. Refer to Kingwood Corporation. What will be the effect on overall corporate profits if the two divisions agree to an internal transfer of 5,000 units?

Extracted text: Kingwood Corporation is comprised of two divisions: X and Y. X currently produces and sells a gear assembly used by the automotive industry in electric window assemblies. X is currently selling all of the units it can produce (25,000 per year) to external customers for $25 per unit. At this level of activity, X's per unit costs are: Variable: Production SG&A Fixed: Production SG&A $7 2 Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y Division currently purchases these units from an outside vendor at $22 each. 65