PRACTICE Satellite Products, Inc. owns two subsidiaries, Saturn Systems and Neptune Audio. Saturn supplies printed circuit boards used by Neptune Audio for radios production (1 board for each radio unit). Neptune receives 20,000 boards from Saturn annually. The market price of these boards is $40. Their total variable cost of production is $20. The market price of the radios is $105. The unit variable cost of the radio is $30 excluding the cost of the circuit board. Saturn Systems is currently operating at full capacity of 35,000 boards per year (including those transferred to Neptune Audio). Demand for the boards is strong and all 35,000 could be sold to outside customers. Saturn uses the full market price as the transfer price charged to Neptune Audio. The manager of Neptune Audio argues that Saturn Systems benefits from intercompany transfers because of reduced advertising and other selling costs. Thus, he wants to negotiate a lower transfer price of $35. 1. Calculate the contribution margins for the two subsidiaries using the $40 transfer price.