Figure 20-6 Callahan Industries Is a Decentralized Company That Evaluates Its Divisions

question 23

Multiple Choice

Figure 20-6
Callahan Industries is a decentralized company that evaluates its divisions based on ROI. The Jones Division has the capacity to make 5,000 units of a component. The Jones Division's variable costs are £200 per unit.
The Thomas Division can use the component in one of its products. The Thomas Division would incur £100 of variable costs to put the component in its own product that sells for £500.
-Refer to Figure 20-6. Assume the Jones Division can sell 4,000 units at £420. Any excess capacity will be unused unless the units are purchased by the Thomas Division, which could use up to 200 units. The maximum transfer price that the Thomas Division would be willing to pay would be

• A)£400.
• B)£200.
• C)£420.
• D)£360.

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Definitions:

Vertically Integrated

A business model in which a company controls multiple stages of production or distribution within the same industry.

HUAC Inquiries

Investigations conducted by the House Un-American Activities Committee, especially during the mid-20th century, targeting suspected communists.

Un-American Activities

Activities deemed not in accordance with American values or interests, often associated with the House Un-American Activities Committee (HUAC) which investigated alleged disloyalty and subversive activities.

Decade-long Blacklist

The Decade-long Blacklist refers to the period during the mid-20th century, particularly in the United States, where individuals in the entertainment industry were barred from work due to alleged communist ties or sympathies.