Reference no: EM131807210

Yard Machines manufactures and sells mowers through a divisional structure. Division B buys engines from Division A and assembles the mowers. Division A, which is operating at capacity, incurs an incremental manufacturing costs of $702 per engine. Division A can sell only 45% of its output capacity of 1,927 engines per month to the external market at a price of $1,973 per engine but it incurs variable marketing and distribution costs of $133 per engine. Division B can assemble and sell more than 1,927 mowers per month. If Division B purchases engines of the same quality from external suppliers at a price of $1,715 per engine, it will incur in variable purchasing costs of $82 per engine. If Division B purchases engines from Division A, it will incur variable freight costs of $52 per engine. Yard Machines' division managers can act autonomously to maximise their own division's operating profit.

What is the minimum average transfer price at which the Division A manager would be willing to sell 1,927 engines to Division B (rounded using two decimals)?