A company had 2 divisions. Division A makes a product and transfers them to Division B which sells the product. There is an external market in which A can sell the product and an external market in which B could buy the product. Which of the following is the rule for determining the minimum transfer price?

1. The lower of the net marginal revenue to B and the external purchase price

2. Variable cost of A any lost contribution to A

3. The higher of the net marginal revenue to B and external purchase price

4. Variable cost of A + any lost contribution from A