Heart Company Has Two Divisions

question 129

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, the range of prices that should be used during negotiations between the two divisions is

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

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Definitions:

Breakeven Number

The point at which total cost and total revenue are equal, resulting in no net loss or gain, and is often used to analyze the financial viability of a project or business.

Corporate Tax Rate

The percentage of a corporation's profit that is paid to the government as tax, varying by country and sometimes by profit level.

Value Of The Dollar

Refers to the purchasing power of the U.S. dollar, which can be influenced by factors such as inflation rates and foreign exchange rates.

Industry Life Cycle

This concept describes the stages of a business sector's development from its initial entrance (introduction), through growth and maturity, to eventual decline.