Division P of the Nyers Company Makes a Part That

Multiple Choice

Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.
If outside customers demand 70,000 units, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by Q?

A) $33 per unit
B) $27 per unit
C) $28 per unit
D) $29 per unit