Moe's Food Company recently acquired an olive oil company that has an annual capacity of 2,000,000 liters and that processed and sold 1,400,000 liters last year at a market price of $4 per liter. The purpose of the acquisition was to furnish oil for the Cooking Division. The Cooking Division needs 800,000 liters of oil per year. It has been purchasing oil from suppliers at the market price less a 10% quantity discount. Production costs at capacity of the olive oil company, now a division, are as follows: Variable manufacturing costs $1.74 Fixed manufacturing overhead 0.40 Total $2.14 Sales commissions of $0.30 are normally paid for external sales of olive oil, but no commissions will be paid for any sales done internally. In determining what transfer price to use, the manager of the Olive Oil Division argues that $4, the market price is appropriate. The manager of the Cooking Division argues that the cost of $2.14 should be used, or perhaps a lower price, since fixed overhead costs should be recomputed with the larger volume. Determine the minimum transfer price under the following assumptions: (a) The Olive Oil Division can only sell 1,000,000 liters to outsiders; (b) Any output of the Olive Oil Division not sold to the Cooking Division can be sold to outsiders; (c) The Olive Oil Division can sell 1,400,000 liters to outsiders in the coming year.