When June and Jerry started their business, Swifty Inc., their mission was simple: to provide a quiet, round-trip ride to hundreds of office workers so they could work during the commute. At the beginning, they had enough capacity to accommodate all interested customers. But as this idea gained popularity, there was demand they couldn't meet - and not just by commuters, but also by travelers heading to and from the airport.

June and Jerry organized their growing business into geographical segments, evaluating each on its operating income and profit margin. The two owners retained control of asset purchases. June and Jerry still intended for their segment managers to work together, helping each other with capacity needs when required. Such participation was left up to the segment managers, though. All three segments had the same variable and absorption cost for an average two-way trip, at $14 and $21 per customer, respectively. Since the culture in this company was very open, each manger was aware of the other segments' similar cost structures.

The Airport segment's drivers were already prebooked for the upcoming holiday weekend, and there was a steady stream of calls coming in with more requests for this service. Naturally, the Airport segment manager called on both the Hawthorn and Bolton segments to ask for help. Hawthorn had some capacity, but Bolton was prebooked with its own repeat customers.

Listed below are the average rates to provide two-way transportation services to one person or two people (rate was the same) in each geographic area.

	Hawthorn	Bolton	Airport
Average market price	$45	$60	$80

(a) If you managed the Hawthorn segment and had some available capacity, how much would you want to charge the Airport segment for taking on this additional work?

Transfer price

Do you believe the Airport manager would agree to it?