A Company Has Two Divisions, X and Y, Each Operated

question 107

Multiple Choice

A company has two divisions, X and Y, each operated as an investment center. X charges Y $55 per unit for each unit transferred to Y. Other data are: X is planning to raise its transfer price to $65 per unit. Division Y can purchase units at $50 each from outsiders, but doing so would idle X's facilities now committed to producing units for Y. Division X cannot increase its sales to outsiders. From the perspective of the short-term profit position of the company as a whole, from which source should Division Y acquire the units?

• A)Outside vendors.
• B)Division X, but only at the variable cost per unit.
• C)Division X, but only until fixed costs are covered, then should purchase from outside vendors.
• D)Division X, in spite of the increased transfer price.
• E)It is not possible to tell without additional information.

Calculate and interpret financial metrics important in supply chain management such as inventory turnover and weeks of supply.

Understand the strategies of backward and forward integration in supply chain management.

Identify key organizations that set ethical standards for supply management.

Evaluate the effectiveness of various e-procurement strategies.

---

Definitions:

Time

The indefinite continued progress of existence and events in the past, present, and future regarded as a whole.

Business Activities

Various actions undertaken by companies as part of their operation, including production, sales, marketing, and administration.

Ethical Choices

Decisions made based on moral principles, considering what is right and wrong.

Cultural Differences

Variations in beliefs, values, habits, and social practices among people from different backgrounds.