Division G Makes a Part That It Sells to Customers

question 58

Multiple Choice

Division G makes a part that it sells to customers outside of the company.Data concerning this part appear below:
Division H of the same company would like to use the part manufactured by Division G in one of its products.Division H currently purchases a similar part made by an outside company for $83 per unit and would substitute the part made by Division G.Division H requires 500 units of the part each period.Division G has ample capacity to produce the units for Division H without any increase in fixed costs and without cutting into sales to outside customers.If Division G sells to Division H rather than to outside customers,the variable cost be unit would be $2 lower.What should be the lowest acceptable transfer price from the perspective of Division G?

• A) $47
• B) $87
• C) $83
• D) $57

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Definitions:

Blake Mouton Grid

A managerial grid model that identifies five leadership styles based on the concern for people and the concern for production.

Concern For Production

The focus on optimizing and maximizing the output and efficiency of production processes within an organization.

Concern For People

The degree of consideration and compassion an organization or individual displays towards the welfare and interests of others.

Blake Mouton Grid

A framework for understanding leadership style based on the manager’s concern for people and their concern for production, yielding five distinct management styles.