The Northern Division of Surge Limited sells Part X to other companies for 79.50 per unit. According to the companys cost accounting system, the costs to Northern Division to make a unit of Part X are:

Direct material 62

Direct Labour 2

Variable manufacturing overhead

10 Fixed manufacturing overhead 2

The Southern Division of Surge Limited uses a part much like Part X in one of its products. The Southern Division can buy this part from an outside supplier for 78.25 per unit. However, the Southern Division could use Part X instead of this part that it purchases from outside suppliers.

What is the most that the Southern Division would be willing to pay the Northern Division for Part X?

A. 79.50 per unit

B. 76.50 per unit

C. 74.00 per unit

D. 78.25 per unit