Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below:
- Selling price to outside customers $50
- Variable cost per unit $30
- Total fixed costs $400,000
- Capacity in units 25,000
Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X can sell all of the units it makes to outside customers. What is the lowest acceptable transfer price from the standpoint of the selling division?