C Corporation has two divisions. Assume Division XX has a product that can be sold either to outside customers or to Division YY of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits.

Division XX-

Capacity in units

100,000

Number of units being sold to outside customers

Selling price per unit to outside customers $1.258

Variable costs per unit

$565

Fixed costs per unit (based on capacity)

100,000

$326

Division YY-

Number of units needed for production

40.000

Purchase price per unit now being paid to an outside supplier

$860

Assume that $175 per unit in variable selling costs can be avoided on C intracompany sales.

Q: The lowest acceptable intracompany price per unit for the C's selling division is?