Dockside Enterprises, Inc., operates two divisions: (1) a management division that owns and manages bulk carriers on the Great Lakes and (2) a repair division thatoperates a dry dock in Tampa, Florida. The repair division works on company ships, as well as other large-hull ships. The repair division has an estimated variable cost of$47 per labor-hour. The repair division has a backlog of work for outside ships. They charge $87 per hour for labor, which is standard for this type of work. Themanagement division complained that it could hire its own repair workers for $57 per hour, including leasing an adequate work area.

If the repair division had idle capacity, what is the minimum transfer price that the repair division should obtain?

$57.

$47.

$40.

$87.