The

AquaAqua

Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of

$8080

per screen. The SD can sell all its output to the outside market at a price of

$105105

per screen, after incurring a variable marketing and distribution cost of

$66

per screen. If the AD purchases screens from outside suppliers at a price of

$105105

per screen, it will incur a variable purchasing cost of

$88

per screen.

AquaAqua's

division managers can act autonomously to maximize their own division's operating income.

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