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A company has two divisions: Division A, which produces a component, and Division B, which assembles the component into a final product. Division A has
A company has two divisions: Division A, which produces a component, and Division B, which assembles the component into a final product. Division A has variable costs of $40 per unit and fixed costs of $10,000 per month. Division B can buy the component from an external supplier for $70 each. However, if Division A sells the component to Division B, it will lose revenue of $60,000 per month from external sales. Determine the transfer price that maximizes the company's overall profit, considering the opportunity cost.
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