The Following Information Is Available for the Two Divisions of MAC

question 119

Essay

The following information is available for the two divisions of MAC Company:
$\begin{array}{llr} \text {Division A: } &\\ \text { Selling price to outside market } &\$55\\ \text {Standard unit\_level costs } &35\\ \text { Division B: } &\\ \text { Selling price of finished product } &\$95\\ \text { Standard unit\_level costs } &25\\\end{array}$

Division A has no excess production capacity.
Required:
a) In order to ensure the best use of the productive capacity of Division A, what transfer price should be set by Division A and what effect does this transfer price have on the overall margin for the company? Is the answer goal congruent under the general rule?
b) Should Division B accept a special order for its product if the selling price is reduced to $70. Use your answer from (a) and explain.
c) Would your answer to (b) change if Division A had excess capacity? Explain.

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Definitions:

Discrete Exchange

A transaction that occurs in isolation, where goods, services, or assets are traded between parties without ongoing obligations or relationships.

Occupational Excellence

The achievement of the highest standards of performance within a particular profession or job, often involving continuous improvement and dedication.

Withdrawal Stage

A phase in which an individual begins to disengage from their job or organizational roles, often preceding resignation.

Mentoring

A process in which an experienced individual provides guidance, advice, and support to a less experienced person.