Fois Company Has Two Divisions, Division X and Division Y

question 44

Multiple Choice

Fois Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of a particular part per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of the part each month from Division X. In computing the lowest acceptable transfer price from the perspective of the selling division, the lost contribution margin per unit portion of the transfer price computation would be:

• A) $56.00 per unit
• B) $30.00 per unit
• C) $14.00 per unit
• D) $25.00 per unit

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Definitions:

Placebo Effect

The apparent success of a medication or treatment due to the patient’s expectations or hopes rather than to the drug or treatment itself.

Novelty Bias

The tendency of individuals to prefer novel objects or experiences over familiar ones.

Therapeutic Window

The range of drug dosages which can treat disease effectively while staying within the safety margin, minimizing the risk of side effects.

Therapeutic Alliance

The bond of confidence and mutual understanding established between therapist and client, which allows them to work together to solve the client’s problems.