Clariton Corporation has two divisions, Kissimmee and Grant, and evaluates management on the basis of return on investment. Kissimmee currently makes a part that it sells to both Grant and outsiders. Selected data follow.

Selling price to Grant	$	33
Variable cost		25
Fixed costs		88,000

Kissimmee is seeking an increase in its selling price to $36 per unit because of rising costs. Grant can obtain comparable units from an outside supplier for $34; however, if Grant uses the supplier, Kissimmee will have idle capacity because of an inability to increase sales to outsiders. From the perspective of Clariton Corporation:

Multiple Choice

A) Kissimmee should continue to do business with Grant and charge $36 per unit.

B) Kissimmee should continue to do business with Grant and charge $33 per unit.

C) Kissimmee should continue to do business with Grant because Kissimmees variable cost per unit is only $25.

D) Grant should do business with the outside supplier.

E) Grant should split its business between Kissimmee and the outside supplier.