Company L has two divisions which are profit centers that are interdependent.Division A sows spinach seeds in a green house and when the plants have sprouted and still young they are sold to Division B. Division B grows the small plants until they are fully developed and sell them to the nearby restaurants. The selling price for a bunch of spinach is 154 KES. The variable cost for Division B is 60 KES. Fixed cost per month is8700 KES.

Division A has a variable cost of 25 KES per bunch of small plants and a fixed cost of 1200 KES per month.

a. In the month of March, Division B sells 150 bunches of spinach to the restaurents. What is the profit Division B earns that month (the cost includes the transfer price of 25 KES per bunch paid to Division A)?

b. Assuming that Division A sells its small plants only to Division B, and assuming that 150 bunches were sold in March, how much profit will Division A make in March? Is the transfer price that Division A receives adequate for the Division's operations? Why or why not?