When the selling division in an internal transfer has excess capacity for the product that is being transferred, what is the lowest acceptable transfer price as far as the selling division is concerned?

Multiple Choice

The amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.

The market price charged to outside customers, less any costs saved by transferring internally.

Variable cost of producing a unit of product.

The amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.