Concord Company Has Two Divisions,Rice and Pine

question 101

Essay

Concord Company has two divisions,Rice and Pine.Rice produces an item that Pine could use in its production.Pine currently is purchasing 12,000 units from an outside supplier for $18 per unit.Rice is currently operating at less than its full capacity of 500,000 units and has variable costs of $10 per unit.The full cost to manufacture the unit is $14.Rice currently sells 450,000 units at a selling price of $20 per unit.
a.What will be the effect on Concord Company's operating profit if the transfer is made internally?
b.What is the minimum transfer price from Rice's perspective?
c.What is the maximum transfer price from Pine's perspective?

---

Definitions:

Corporate Elites

Refers to the highest-ranking officials and decision-makers within corporations, often perceived as possessing significant influence over national and international policies.

Lobbying

The act of attempting to influence decisions made by officials in the government, often by different interest groups.

Federal Government

A system of government where power is divided between a national (federal) government and various regional governments.

Astroturf Lobbying

A political strategy that simulates grassroots support for an issue, often sponsored by corporations or interest groups to create the appearance of widespread public backing.