Hu Corporation has two operating divisions, A and B. The following information is provided for Division A: Unit selling price
$ 200
Unit variable costs
$ 120
Unit fixed costs
$ 40
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 $180 to purchase the product from an outside source. If
Division A sells internally, it can save $75 per unit in variable costs. Assuming Division A is operating at
capacity, what price should it charge Division B if the transfer is to be made?
A) $115
B) $195
C) $125
D) $200