Edwards Inc

question 117

Essay

Edwards Inc. manufactures electronics. It consists of several divisions classified as investment centers for performance evaluation purposes. Division A desires to purchase materials from Division B at a price of $85 per unit. Division B can produce 25,000 units at full capacity, and is currently operating at 90% capacity with a variable cost of $80 per unit. Division B currently sells only to outside customers who pay $115 per unit. Division A pays an outside company $110 per unit. If purchased from Division B, B's variable costs per unit would be $10 less because the division would save on marketing expenses for these internal transfers. Division A requires 10,000 units.
Required:
1. How would Division B selling to Division A affect Division A's purchasing costs?
2. How would intercompany sales affect Division B?
3. What solution would be best for Edwards Inc., assuming Division B has the ability to operate at full capacity?

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Definitions:

PolyA Tail

A stretch of adenine nucleotides attached to the 3' end of eukaryotic mRNA molecules, aiding in their stability and translation.

Introns

Regions of an RNA transcript, or its DNA template, which are removed before the RNA is translated into a protein, and do not code for protein.

Transcription

The process by which the information in a strand of DNA is copied into a new molecule of messenger RNA.

Zinc Finger

A small protein structural motif that is characterized by the coordination of one or more zinc ions in order to stabilize the fold.