Infobytes Corporation Infobytes Corporation Manufactures and Sells Various High-Tech Office

question 1

Multiple Choice

Infobytes Corporation Infobytes Corporation manufactures and sells various high-tech office automation products. Two divisions of Infobytes Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division:
Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month.
Refer to Infobytes Corporation. Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?

• A) $50
• B) $45
• C) $20
• D) $35

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Definitions:

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider.

Good Or Service

Any tangible product (good) or intangible offering (service) that can be sold or provided in a market to satisfy the demand of a customer.

Marginal Revenue

The additional income received from selling one more unit of a product or service.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a good or service.