Shane Products manufactures and sells sportswear and sports equipment. The apparel division incurs the following costs for the production of a single t-shirt when 6,000 shirts are produced each year Direct materials Direct labor Variable overhead Fixed overhead Total cost $1.25 1.00 .75 50 $3.50 The company sells the t-shirts to retail stores for $7.50. The sports equipment division is doing a promotion whereby each customer that purchases a tennis racket during the month of May receives a free t-shirt. The sports equipment division would like to purchase these shirts from the shirt division Assuming the t-shirt division has excess capacity and there would be no contribution margin lost on outside sales if they sell to the sports equipment division, the minimum transfer price that should be charged is: $3.50 O $7.50 O $7.00 $3.00