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A company has two divisions: Division A, which produces a component, and Division B, which uses the component in its final product. Division A has
A company has two divisions: Division A, which produces a component, and Division B, which uses the component in its final product. Division A has variable costs of $50 per unit and fixed costs of $20,000 per month. Division B can buy the component from external suppliers for $70 each. Determine the transfer price that maximizes the company's overall profit if Division A can sell the component in the external market for $75 each.
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