Question: Formosa Plastic Corporation, USA has two major manufacturing divisions in Delaware and Texas of USA. Delaware Division is currently procuring its major raw material from

Formosa Plastic Corporation, USA has two major manufacturing divisions in Delaware and Texas of USA. Delaware Division is currently procuring its major raw material from an outside supplier for $4/kg. The company's Texas Division, which has excess capacity, makes and sells this material for external customers at a total variable cost of $3.5/kg and a selling price of $4.25/kg. If Texas Division makes internal transfer to Delaware Division, it will not have to incur sales commission of $0.5/kg that it currently incurs on sales to external customers. If sales to outsiders will not be affected, the minimum acceptable transfer price to Texas division would be

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