The selling incurs variable cost of $2 per unit. The buying division incurs additional $5 per unit and sells the final product for $15 per unit.

1. If there is no intermediate market and the selling division is not operating at capacity, what is the optimal transfer price?
   1. $15
   2. $7
   3. $5
   4. $2

2. What is the companys profit per unit?
   1. $12.
   2. $8.
   3. $7.
   4. $5.