Division Sell is operating at full capacity producing component XBD2 which it sellsexternally for $8.00 per unit. The variable cost of production is $5 per unit. Another internaldivision, Division Buy is negotiating a transfer price for purchasing component XBD2 fromDivision Sell. Because of saved transport costs, the variable cost of producing componentXBD2 for Division Buy would be $4.50 per unit.What is the minimum transfer price that Division Sell should accept for transferringcomponent XBD2 to Division Buy?
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