Twyla Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. Twyla sells car stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available for Twyla's standard unit: variable cost per unit $34; fixed cost per unit $23; and selling price to outside customer $85. Berna currently purchases a standard unit from an outside supplier for $80. Because of quality concerns and to ensure a reliable supply, the top management of Berna has ordered Twyla to provide 200,000 units per year at a transfer price of $34 per unit. Twyla is already operating at full capacity. Twyla can avoid $4 per unit of variable selling costs by selling the unit internally.

Instructions
Answer each of the following questions.
(a) What is the minimum transfer price that Twyla should accept?
(b) What is the potential loss to the corporation as a whole resulting from this forced transfer?
(c) How should the company resolve this situation?