Edwards Inc

question 98

Essay

Edwards Inc.manufactures electronics.It consists of several divisions operating investment centers.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 would be $10 less because it saves on marketing expenses.Division A requires 10,000 units.
Required: How would Division B selling to Division A affect Division A's purchasing costs? How would intercompany sales affect Division B? What solution would be best for Edwards Inc. ,assuming Division B has the ability to operate at full capacity?

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Definitions:

Financially Self-Sufficient

The ability to support oneself without external financial assistance.

Impression Management

The process by which individuals attempt to control the perceptions others form of them, particularly in social and organizational contexts.

Self-Confidence

The belief in one's own abilities, skills, and worth.

Networking

The process of engaging with people to share information and build professional or personal connections.