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Division A makes a part that sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $75

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

Selling price to outside customers $75

Variable cost per unit $50

Total fixed costs $400,000

capcity in units 25,000

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 $70 per unit and would substitue the part made by Division A. Division B requires 5,00 units of the part each period. Division A can already sell all the units it can reduce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A?

a. $66

b. $16

c. $75

d. $50

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