Dukes Computing Systems

Dukes Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing. The Marketing Division has always purchased a particular motherboard from Production at $65 per unit. The Production Division is considering raising the price to $75 per unit. The Production Division's costs related to the motherboard production are as follows:

Variable costs perunit:$65

Monthly fixedcosts:$10,000

The Marketing Division handles the promotion and distribution of the motherboard purchases from the Production Division and sells each motherboard for $125. Marketing Division incurs monthly fixed costs of $5,000. Marketing Division sells 2,000 units per month. Marketing Division can buy the same motherboard from outside suppliers for $75.

TThe Production Division is operating at maximum capacity because of strong worldwide demand for the product and the Production Division can sell all it produces to outside customers for $75 per motherboard.

What should be the motherboard transfer price between the Production Division and Marketing Division in order for Dukes' to optimize profits?

A.$55

B.$125

C.$65

D.$75