Division a Produces a Part with the Following Characteristics

question 157

Multiple Choice

Division A produces a part with the following characteristics: Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Suppose Division A is currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price. From the point of view of Division A, any sales to Division B should be priced no lower than:

• A) $27
• B) $29
• C) $20
• D) $28
• E) $21

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Definitions:

Justice

The principle of fairness and moral rightness in the treatment of individuals, especially in the administration of laws.

Liability

The state of being legally responsible for something, such as a debt or obligation.

Statutes

Laws enacted by legislatures at the federal or state level, which serve as the written rules and regulations that govern society.

Prize Roses

Specially bred and highly valued roses that are often grown for competitive display in horticultural shows.