The supplying division of a company produces a component which is sold to the company's buying division and to external customers. The supplying division has incremental costs of $40 per unit and can sell the component to its external customers for $75. The buying division can purchase a similar component from an external supplier for $80. Which of the following is TRUE regarding Transfer Prices?

1. Assuming the supplying division has no excess capacity, the minimum amount it would charge the buying division is $40.

2. The supplying division would have to consider the amount of fixed costs related to the component before determining the transfer price.

3. The maximum transfer price that the supplying division could charge the buying division is $80 regardless of whether the supplying division has excess capacity or not.

4. Assuming the supplying division has excess capacity, the minimum transfer price it would charge the buying division is $75.