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Transfer Pricing with Negotiated Transfer Price and External Market Price : A company has two divisions: Division A, which produces a component, and Division B,
Transfer Pricing with Negotiated Transfer Price and External Market Price: A company has two divisions: Division A, which produces a component, and Division B, which uses the component in its final product. Division A has variable costs of $20 per unit and fixed costs of $10,000 per month. Division B can buy the component from external suppliers for $30 each. Determine the negotiated transfer price that maximizes the company's overall profit if Division A can sell the component in the external market for $35 each.
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