Bike-me Inc. produces and commercializes bicycles. The Company has several manufacturing divisions that manufacture the components of the bikes and transfer them to the Cycles division, which assembles the pieces and sells the bikes to consumers. The Cycles division can choose to acquire the components internally or from external suppliers. The Wheels division is one of the components divisions that manufactures the wheels. Its wheels can be sold internally and externally. Every division is considered a profit center and managers are free to negotiate transfer prices among them. For a specific period, the wheels division manufactures 52,000 wheels and the Cycles division assembles 26,000 bikes. Every bike needs two wheels.

The following charts show the two divisions prices and costs for that period:

Calculate the maximum transfer price that Cycles division would be willing to pay for the acquisition of one wheel from the Wheels division, if there were no external market of wheels and it wanted to break even (i.e., profits = 0). Show your calculations.

Wheels division Variable cost (per wheel) 8 Fixed Costs 79,000 190 Cycles division Selling price of a bike Costs: Wheels (per bike) Other components (per bike) Fixed Costs ? ? 90 300,000