5. Grindstead Mills has two divisions. The Transporting division has a long-term contract with Farmer Ellis to purchase wheat for $5 per bushel. Transporting incurs variable costs of $1 per bushel in transporting the wheat, and has total fixed costs of $25,000 per year. Transporting has a capacity of 50,000 bushels per year. Currently Grinding is the only customer that Transporting services. Grinding takes wheat and converts a bushel of wheat into 40 pounds of flour, which is sacked (in 40 pound bags)and sold to a bakery. Grinding has fixed costs of $75,000 per year. The variable costs of processing a bushel of wheat into flour is $5. Grinding has a capacity to produce a maximum of 2,500,000 pounds of flour a year. Grinding can buy wheat from an outside vendor for $7.50 per bushel and it sells the flour for $.40 per pound. Last year, Grinding processed 1,750,000 pounds of flour and plans to increase that to 2,000,000 for the current year, and currently plans to purchase as much wheat from Transporting as possible if the price is right. If Grindstead Mills uses cost-based transfer pricing at 120% of full cost, what is the cost that Transporting department will offer as the transfer price?