Division S of Kracker Company Makes a Part That It

question 100

Multiple Choice

Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below: Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.
Suppose that Division S has ample idle capacity to handle all of Division B's needs without any increase in fixed costs or cutting into sales to outside customers. If Division S refuses to accept a transfer price of $28 or less and Division B continues to buy from the outside supplier, the company as a whole will:

• A) gain $20,000 in potential profit.
• B) lose $60,000 in potential profit.
• C) lose $70,000 in potential profit.
• D) lose $20,000 in potential profit.

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Definitions:

Reflective Listening

A communication strategy involving actively listening to a speaker and then reflecting back what is heard, promoting understanding and validation.

Connective

An element or feature that links components together, fostering a sense of coherence or unity in a variety of contexts.

Empathic

Showing an ability to understand and share the feelings of another, essentially putting oneself in another's shoes emotionally.

Listening

The dynamic process of taking in, understanding, and reacting to both spoken and unspoken messages.