The Lumbar Division of Vaughn Manufacturing produces and sells lumbar that can be sold to outside customers or within the company to the Contruction Division. The following data have been gathered for the coming period:

Lumbar Divisions:

Capacity: 200000 board feet

Price per board foot: $3.50

Variable production cost per bd ft: $1.25

Variable selling cost per bd ft: $0.50

Construction Divisions:

Board feet needed: 55000

Outside price paid per bd ft: $3

If the Lumbar Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs. If current outside sales are 110000 board feet what is the minimum transfer price that the Lumber Division could accept?

A. $1.40

B. $1.25

C. $3.50

D. $1.75