Question: 7 . Division-A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside

7. 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 (3 points)?

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