The Pole Division of Hillyard Company Produces Poles That Can

The Pole Division of Hillyard Company produces poles that can be sold to outside customers or transferred to the Flag Division of Hillyard Company. Last year the Flag Division bought 50,000 poles from Pole at £2.50 each. The following data are available for last year's activities in the Pole Division: $\begin{array}{lc} \text { Capacity in units. } & \text {400,000 poles}\\ \text {Quantity sold to outside customers. } & \text { 350,000 poles}\\ \text { Selling price per pole to outside customers. } & £ 3.00 \\ \text {Total variable costs per pole. } &£ 2.00\\ \text { Fixed operating costs } &£ 200,000\\\end{array}$

In order to sell 50,000 poles to the Flag Division, the Pole Division must give up sales of 30,000 poles to outside customers. That is, the Pole Division could sell 380,000 poles each year to outside customers (rather than only 350,000 poles as shown above) if it were not making sales to the Flag Division. According to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division

A) £2.50
B) £2.00
C) £2.60
D) £3.00