Refer to the information in Exercise 18.17. Suppose that the Mining Division is not required to transfer its yearly output of 400 000 units of toldine to the Metals Division.
1 From the standpoint of Escuelas, SA, as a whole, what quantity of toldine should the
Mining Division transfer to the Metals Division?
2 Now suppose each division manager acts autonomously to maximise the division’s oper- ating profit. What range of transfer prices will result in managers of the Metals and Mining Divisions achieving the actions determined to be optimal in requirement 1? Explain your answer.
3 Would you recommend that Escuelas allow the divisions to buy and sell toldine in the open market, and to negotiate the transfer price between themselves? Explain your answer.
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