The Table and Chair Divisions Are Part of the Same

question 83

Multiple Choice

The Table and Chair Divisions are part of the same company. Currently the Chair Division buys a part from Table for $384. The Table Division wants to increase the price of the part it sells to Chair by $96 to $480. The manager of Chair has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Chair can buy the part from an outside supplier for $448. The cost data for the Table Division is as follows: $\begin{array}{ll}\text { Direct materials } & \$ 136 \\\text { Direct labor } & 200 \\\text { Variable overhead } & 40 \\\text { Fixed overhead } & 42\end{array}$ If Table ceases to produce the parts for Chair, it will be able to avoid one- third of the fixed manufacturing overhead. The Table Division has excess capacity but no alternative uses for its facilities. is the minimum transfer price that should be charged.

• A) $480
• B) $390
• C) $448
• D) $376

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Definitions:

Organizational Change

Change that a group of people must learn to accept and implement.

Technology Barrier

Obstacles that hinder the adoption, implementation, or effective use of technologies, possibly due to economic, social, or practical reasons.

OD Intervention

Training tools that teach members of the organization how to solve problems they face or make needed changes to organizational development (OD).

Companywide

Pertaining to or affecting all parts of a company, its employees, or its operations, usually in the context of initiatives, policies, or changes.