The company Azinheira, Lda have two divisions, the Division A and the Division B.

Division B monthly purchase 10.000 units to Division A, using as PTI total cost plus

5%. It is also known that the fixed costs incurred corresponding to 33% of total cost.

However, the Division A modernized its production equipment and wants to increase

the PTI to 18 euros/units.

The manager of Division B argues that it cannot support the new value as this would

lower their results to close to zero. Alternatively, the Division B can buy to an external

supplier for 16,5 euros/ unit., benefiting in this case a 45-day payment (cost of capital

opportunity is 4% / quarter). The Division A has no alternative use for this material.

Request:

Setting a price range for this transaction.