Two of the Decentralized Divisions of Gamberi Electronics Corporation Are

question 212

Multiple Choice

Two of the decentralized divisions of Gamberi Electronics Corporation are the Plastics Division and the Components Division. The Plastics Division sells molded parts to both the Components Division and to customers outside the corporation.Assume that the Plastics Division is currently operating at full capacity. Also assume that the Components Division wants to increase the number of parts it purchases from Plastics. In order to maintain its current level of profitability, the Plastics Division should not accept any transfer price on these additional parts that is below the:

• A) variable cost of the additional parts.
• B) full (absorption) cost of the additional parts.
• C) variable cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation.
• D) full (absorption) cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation.

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Definitions:

Ingratiation

A psychological technique involving efforts to make oneself more likable to others through flattery or the creation of goodwill.

Expert Power

Influence and authority derived from possessing extensive knowledge or expertise in a particular area.

Referent Power

Influence based on being admired or respected, allowing individuals to persuade others because of their personality, integrity, or other attractive traits.

Coercive Power

The ability to influence others' behavior by threats, punishment, or negative reinforcement.