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	$	87
Variable cost per unit	$	64
Total fixed costs	$	592,000
Capacity in units		37,000

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 $84 per unit and would substitute the part made by Division A. Division B requires 6,200 units of the part each period. Division A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A?

Multiple Choice

• $87.

• $80.

• $16.

• $64.