Heart Company Has Two Divisions

question 181

Multiple Choice

Heart Company has two divisions. Division A is interested in purchasing 10,000 units from Division B. Capacity is available for Division B to produce these units. The per-unit market price is $30 per unit, with a variable cost of $25. The manager of Division A has offered to purchase the units at $22 per unit. In an effort to make this transfer price beneficial for the company as a whole, what range of prices should be used during negotiations between the two divisions?

• A) $22 to $30
• B) $22 to $25
• C) over $30
• D) $25 to $30

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Definitions:

Express Authority

The power granted to an agent explicitly by the principal, typically through direct, clear instructions.

Principal's Express Statements

Direct and clear statements made by a principal (the person who has given authority to another, the agent, to act on their behalf) regarding their intentions, instructions, or policies.

Express Ratification

The explicit approval or confirmation of a previously unauthorized act or agreement.

Implied Ratification

Acceptance or approval of an act or agreement by behavior that suggests agreement, without express confirmation.