Broome, Inc. produces cleaning equipment, and operates several divisions. Division A produces a product that it sells to other companies for $18 per unit. It is currently operating at full capacity of 45,000 units per year. Variable manufacturing cost is $11 per unit, and variable marketing cost is $3 per unit.

The company wishes to create a new division, Division B, to produce an innovative new tool that requires the use of Division A's product (or one very similar). Division B will produce 30,000 units. Division B can purchase a product equivalent to Division A's from Company X for $16 per unit. However, Broome, Inc. is considering having Division A supply Division B with the product.

If Division A supplies Division B, the transfer price would be $14 and there would be no marketing costs associated with the units.

Q. From Division A's perspective the net benefit (cost) is?

a) Net benefit of $420,000.

b) Net cost of $45,000.

c) Net cost of $120,000

d) Net cost of $30,000