1. The motor division of Zenx Inc. produces motors that can be widely used by manufacturers of vaiours appliances. Sales and cost data on the motors are as follows:

Selling price per unit on the market	340
Variable costs per unit	268
Fixed costs (based on capacity)	42
Annual production capacity in units	120,000

The appliance division of Zenx. Inc can use the motors in the productin of one of its products. The Appliance division will need 10,000 motors per year. It has received a quote of 328 per motor from another manufacturer. Managers of Zenx. Inc. are evaluated based on divisional profits.

Assume that the motor division is selling only 110,000 motors per year to outside customers. From the standpoint of the motor division, what is the lowest acceptable transfer price for motors sold to the appliance divisions?

1. 268
2. 340
3. 42
4. 328