Zee Spin manufactures a line of golf club wedges (sand wedge, pitching wedge, lob wedge, and attack wedge) that vary with loft and club head sole design. The wedges have become very popular among professional and serious golfers because of their unique club head design and shafts. All Zee Spin wedges consist of three parts: club head, shaft, and grip. Zee Spin manufactures the club heads and shafts and purchases the grips. The three components are assembled to produce a wedge that is sold to distributors, who then sell them to golf pro shops and websites. The shafts are specially designed to match the playing characteristics of the Zee Spin wedge club head.
The following table summarizes the total costs of producing a complete Zee Spin wedge. All the various models of Zee Spin wedges (sand wedge, pitching wedge, lob wedge, and attack wedge) have the same cost structure.

Zee Spin traditionally only sold complete wedges (club head, shaft, and grip), and the company was treated as a single profit center. But with the success of the Zee Spin brand and recent inquiries from other club makers about purchasing just Zee Spin shafts, which are unique in the industry, Zee Spin is going to sell both complete wedges (as they do now) and individual shafts. To implement this strategy, Zee Spin will create two profit centers: Wedges and Shafts. The Shaft profit center will produce shafts for external customers, as well as for the Zee Spin Wedge profit center. There will be two profit center managers in Zee Spin that will be rewarded based on the profits of their respective profit centers. The Zee Spin wedges will continue to be sold for $75 per complete wedge, while the shafts will be sold for $23 per shaft.
Shafts that are sold externally will incur variable selling costs of $2.43 (primarily sales commission and shipping). These costs are not incurred for shafts sold internally to the Wedge profit center.
Required:
a. The owners of Zee Spin want to maximize profits and realize that, to properly motivate the managers of the Wedges and Shafts profit centers, they need to set the proper transfer price for the shafts produced by the Shafts profit center and sold to the Wedges profit center. Using the actual data provided in the problem, what transfer price should be used for the shafts produced by the Shafts profit center and sold to the Wedges profit center? (Your answer should be a specific number, such as $18.00.)
b. After implementing the transfer price policy you described in part (a), what problems should the owners of Zee Spin anticipate? Stated differently, what non-firm-value maximizing behaviors by the two profit center managers should the owners of Zee Spin expect to occur?

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Club Head $16.05 Total Shaft $11.48 Variable manufacturing cost Variable selling cost Fixed manufacturing cost Other common fixed costs Grip Total cost $27.53 5.43 10.69 6.43 2.50 $52.58 4.17 6.52