Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow: Capacity in units 60,000unitsSelling price per unit$40per unitVariable costs per unit$28per unitFixed costs per unit at capacity$9per unit Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Assume that Division A is presently operating at capacity. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
A. $38 per unit
B. $39 per unit
C. $37 per unit
D. $36 per unit
Answer: B
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