Division a Makes a Part That It Sells to Customers

Multiple Choice

Division A makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division B of the same company would like to use the part manufactured by Division A in one of its products.Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A.Division B requires 5,000 units of the part each period.Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers.If Division A sells to Division B rather than to outside customers,the variable cost be unit would be $1 lower.What is the lowest acceptable transfer price Division A should accept?

A) $40
B) $38
C) $30
D) $29
E) $10