Division C Makes a Part That It Sells to Customers

question 107

Multiple Choice

Division C makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division D of the same company would like to use the part manufactured by Division C in one of its products. Division D currently purchases a similar part made by an outside company for $39 per unit and would substitute the part made by Division C. Division D requires 5,810 units of the part each period. Division C has ample excess capacity to handle all of Division D's needs without any increase in fixed costs and without cutting into outside sales. What is the lowest acceptable transfer price from the standpoint of the selling division?

• A) $40
• B) $39
• C) $36
• D) $37

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Definitions:

Conflict Management Strategy

Methods or approaches used to handle disputes or disagreements in a constructive manner.

Hard Sell

A forceful, aggressive marketing or sales strategy aiming to persuade customers to purchase a product or service.

Domination

The exercise of power or influence over others to control their actions or decisions.

Conflict Management Strategy

Approaches and techniques used to address and resolve conflict in a constructive manner.