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XYZ, Inc., operates under a decentralized structure. XYZs Western Division plans to purchase a needed component from the Eastern Division that is operating at capacity.

XYZ, Inc., operates under a decentralized structure. XYZs Western Division plans to purchase a needed component from the Eastern Division that is operating at capacity. Eastern incurs relevant costs of $4 to manufacture the component and $1 to ship each unit, and it can sell the unit externally at a price of $8 per unit. The Western Division incurs costs of $9 per unit and sells the finished goods for $18 each. According to the general guideline for transfer-pricing situations, the minimum transfer price per unit should be:

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