Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Selling price to outside customers	$	58
Variable cost per unit	$	45
Total fixed costs	$	28,000
Capacity in units		38,000

Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $56 per unit and would substitute the part made by Division A. Division B requires 6,800 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without impacting sales to outside customers. If Division A sells to Division B, the variable cost per unit would be $2 lower than when selling to outside customers. What should be the lowest acceptable transfer price from the perspective of Division A?

Multiple Choice

• $58.

• $56.

• $43.

• $45.