Question 3: BELL electronics Inc., consists of a Components Division and a Finished Goods Division. The Components Division is currently operating at full capacity. It manufactures components that can either be made part of a finished product by the Finished Goods Division or sold to external customers at a market price of $370 per unit. If the components are sold externally, then an additional $20 transportation cost is incurred. The Components Division's variable manufacturing costs are $200 per unit. When further processing the components, the Finished Goods Division incurs variable costs of $250 per unit and then sells a finished product at a price of $550. The firm has adopted a cost-plus transfer pricing policy: the transfer price equals 110% of the Components Division's variable manufacturing costs. The Components Division has to satisfy the Finished Goods Division's demand at this price before selling any units externally. The Components Division's manager recently complained about this scheme.

1. Does this transfer pricing scheme lead to optimal decisions, i.e., to maximum firmwide profit?