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Division-A makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Selling price to outside customers ----------------------- $75
Variable cost per unit -------------------------------------- $50
Total fixed costs ------------------------------------- $400,000
Capacity in units ---------------------------------------- 25,000

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 $70 per unit and would substitute the part made by Division-A. Division-B requires 5,000 units of the part each period. Division-A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division-A?

a. $75
b. $66
c. $16
d. $50

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