Division a Makes a Part with the Following Characteristics

question 77

Multiple Choice

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each.
Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price. If Division A agrees to sell the parts to Division B at $24 per unit, the company as a whole will be:

• A) better off by $5,000 each period.
• B) worse off by $15,000 each period.
• C) worse off by $5,000 each period.
• D) There will be no change in the profits of the company as a whole.

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Definitions:

Model Village

A community or settlement established as a prototype or for the purpose of demonstrating particular socio-economic strategies or architectural styles.

Interposition

A visual cue in which one object partially covers another, leading the observer to perceive it as closer.

Weber's Law

A principle of perception that states the smallest change in a stimulus that can be detected is a constant proportion of the stimulus level.

Fechner's Law

A principle in psychophysics stating that the perceived intensity of a stimulus changes proportionally to the logarithm of the actual stimulus intensity.