Find optimal transfer price at which the manufacturer sell

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Reference no: EM132647168

Manufacturer sells all its output to the retailer (i.e. there is no external market for the shirts)

The demand curve facing the retailer is: P(q) = 100 - 4q and the Total cost for the retailer is TCR = 15q
The Total Cost for the Manufacturer is TCM = 10 + 0.25 q2

Remember the output of the Manufacturer is all sold to the retailer so its demand is directly dictated by the retailer.

Problem (a) Find the optimal transfer price at which the manufacturer will sell shirts to the retailer such that the total profits of the overall company are maximized.

Problem (b) What is the final price at which shirts will be sold to the end customers?

Problem (c) Compute the profits to the manufacturing and retailer division.

Reference no: EM132647168

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