Fragrance Pty Ltd has two divisions, the Cologne Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Cologne Division. The Bottle Divisions variable manufacturing cost per unit is $2.00 and shipping costs are $0.10 per unit. The Bottle Divisions external sales price is $3.00 per unit. No shipping costs are incurred on sales to the Cologne Division. The Cologne Division can purchase similar bottles in the external market for $2.50.

Assume the Bottle Division has no excess capacity and can sell everything produced externally. Using the general rule, the transfer price from the Bottling Division to the Cologne Division would be:

A. $2.00

B. $2.10

C. $2.50

D*. $2.90

E. $3.00