Edwards Company has two operating divisions, A and B. The following information is provided for Division A:
Unit selling price
$167
Unit variable costs
$117
Unit fixed costs
$ 37
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $162 to purchase the product from an outside source. If Division A sells internally it can save $18.5 per unit in variable costs. Assuming that Division A has sufficient excess capacity to produce all of the units requested by Division B, which of the following is the lowest price Division A should consider for the transfer?
$117.00
$148.50
$162.00
$98.50