Question: Romero Bakery has two divisions. One division makes bagels, and the other division is a restaurant that sells bagel sandwiches. The bagel division makes one bagel for a variable cost of $1.35 but sells the bagel to customers for $1.95. The restaurant division can make sandwiches for $1.25 plus the cost of the bagel and sells sandwiches for $4.49. The restaurant can purchase bagels from a different company for $1.80 per bagel. If the company wants to use a cost-based transfer price to sell bagels from the bagel division to the restaurant division, what will the total contribution margin per unit be?
a. $3.24
b. $1.29
c. $3.14
d. $1.89