Figure 20-5
Allied Industries Has Two Divisions: the Bradley Division

question 14

Multiple Choice

Figure 20-5
Allied Industries has two divisions: the Bradley Division and the Rommel Division. Information about the component that the Bradley Division produces is as follows: $\begin{array}{lr}\text { Sales } & £ 180 \text { per unit } \\\text { Variable manufacturing costs } & £ 80 \text { per unit } \\\text { Fixed manufacturing overhead } & £ 50 \text { per unit } \\\text { Expected sales in units } & 10,000 \text { units }\end{array}$ The Bradley Division can produce up to 12,000 components per year. The Rommel Division needs 800 units of the component for a product it manufactures.
-Refer to Figure 20-5. If the selling division did NOT have excess capacity, the minimum transfer price the selling division would be willing to accept would be

• A)£50.
• B)£80.
• C)£130.
• D)£180.

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Definitions:

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different consumers, based on their willingness to pay.

Durable Good

A consumer good with an expected life (use) of three or more years.

Elastic Demand

A situation in which the demand for a product or service changes significantly in response to changes in price.

Concession Items

Products sold typically at entertainment venues, such as cinemas or sports arenas, often comprising snacks, drinks, and other quick-service foods.