1. A production department can purchase a particular valve from vendors outside the company at a market price of $1,000 per unit.

   Another production department has adequate capacity to supply all of the Assembly Divisions needs for the valve, though, and can produce the valve at a unit variable cost of $200 and unit fixed costs of $500. This production department also incurs variable selling costs of $35 on each unit sold outside the company.

   Which of the following is the maximum negotiated transfer price for the valve?

   	a.	$235.
   	b.	$735.
   	c.	$200.
   	d.	$1,000.