Amsterdam Company is a Manufacturing company that currently operates with two divisions: Algoma and Athabasca. The Algoma division currently manufactures a product that the Athabasca division purchases from an outside supplier. The Athabasca division needs 40,000 units each year, and pays the outside supplier $40 per unit. Algoma division's variable manufacturing cost is $25 per unit and has the capacity to manufacture 65,000 units per year. Currently Algoma has only produces and sells 50,000 units per year at a selling price of $46 per unit.

A) Calculate the minimum and maximum transfer prices.

B) Assume that the managers of both divisions agree on a transfer price of $39 per unit. Calculate the incremental income of each division if a transfer of 40,000 units is done.

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