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Department A produces product A1. A1 can be sold to internal or outside parties. Department B produces product SAM. Prodcution information is as follows. Dept.A

Department A produces product A1. A1 can be sold to internal or outside parties.






Department B produces product SAM.






Prodcution information is as follows.






Dept.A


Dept B

Total fixed cost $1500000



Total fixed cost $25000


Variable cost per unit $175



Variable cost per unit (excluding transfer price) $350
















Both departments have extra production capacity. The market demand is as follows.






1. For A1, 4500 units can be sold at $350 per unit. selling price will be changed $1 for every 5 units sold.






2. For SAM, 500 units can be sold at $1100 per unit






Selling price per unit will be changed $75 for every 125 units sold.













Dept A uses the market price as the transfer price to Dept B.













Calculate selling price of SAM for the maximum profit.

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