Division X Makes a Part That It Sells to Customers

question 88

Multiple Choice

Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below:
$$\begin{array} { ll } \text { Selling price to outside customers } & \$ 50 \\\text { Variable cost per unit } & \$30 \\\text { Total fixed costs } & \$ 400,000 \\\text { Capacity in units } & 25,000\end{array}$$
Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X can sell all of the units it makes to outside customers. What is the lowest acceptable transfer price from the standpoint of the selling division?

• A) $50.
• B) $49.
• C) $46.
• D) $30.

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Definitions:

Central Executive

A component of working memory model that acts as a control system, overseeing attentional processes, and coordinating the information in the system's other components.

Shifts of Attention

The process of changing the focus of cognitive resources from one object or task to another.

Working Memory

A brainpower mechanism with a bounded ability, in charge of temporarily preserving data for future manipulation.

Chunking

A memory strategy involving grouping information into larger, manageable units or chunks.