1 Watson Motors, Inc., operates as a decentralized multidivision company. The Vadner division of Watson Motors purchases most of its airbags from the airbag division. The airbag division's incremental cost for manufacturing the airbags is $160 per unit. Theairbag division is currently working at 80% of capacity. The current market price of the airbags is $200 per unit.Read the requirements.XRequirementsRequirement 1. What is the minimum priceThe minimum price at which the airbag divis1.2.What is the minimum price at which the airbag division would sell airbags to the Vadner division?Suppose that Watson Motors requires that whenever divisions with unused capacity sell productsinternally, they must do so at the incremental cost. Evaluate this transfer-pricing policy using thecriteria of goal congruence, evaluating division performance, motivating management effort, andpreserving division autonomy.3.If the two divisions were to negotiate a transfer price, what is the range of possible transfer prices?Evaluate this negotiated transfer-pricing policy using the criteria of goal congruence, evaluatingdivision performance, motivating management effort, and preserving division autonomy.4.Instead of allowing negotiation, suppose that Watson specifies a hybrid transfer price that "splits thedifference" between the minimum and maximum prices from the divisions' standpoint. What would bethe resulting transfer price for airbags?

Incremental cost refers to the aggregate cost which is incurred because of extra unit of the product…

m price ag divis Requirements 1. What is the minimum price at which the airbag division woul 2. Suppose that Watson Motors requires that whenever divisio internally, they must do so at the incremental cost. Evaluate criteria of goal congruence, evaluating division performance preserving division autonomy. 3. If the two divisions were to negotiate a transfer price, what Evaluate this negotiated transfer-pricing policy using the crit