Grand's Auto Northern Division is currently purchasing a part from an outside supplier. The company's Southern Division, which has excess capacity, makes and sells this part for external customers at a variable cost of $28 and a selling price of $40. If Southern begins sales to Northern, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $3. On the basis of this information, Southern would establish a transfer price of: Multiple Choice $25. $28. $37. $40. None of the answers is correct.