EuropaEuropa ,

Inc., has two divisions, A and B, which manufacture expensive bicycles. Division A produces the bicycle frame, and Division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit centre. The transfer price for the subassembly has been set at the long-run average market price. Assume that Division A's maximum capacity for this product is 1 000

units per month and sales to the intermediate market are now 800

units. The following data are available for each division: