Sako Companys Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Selling price per unit on the intermediate market	$ 128
Variable costs per unit	$ 110
Fixed costs per unit (based on capacity)	$ 8
Capacity in units	25,000

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $125 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

2. Assume the Audio Division is selling 22,500 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?