(Appendix 11A) Ganus Products, Inc

question 54

Multiple Choice

(Appendix 11A) Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below:
The Electronics Division is currently purchasing 7,000 of these relays per year from an overseas supplier at a cost of $59 per relay.
-Assume that the Relay Division is selling all of the relays it can produce to outside customers.Does there exist a transfer price that would make both the Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier?

• A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division should be willing to accept.
• B) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept.
• C) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs.
• D) The answer cannot be determined from the information that has been provided.

---

Definitions:

I/Os

I/Os, or Inputs/Outputs, are points of interaction for a computer or control system where data is received and sent, respectively.

Input Module

A component of a larger system (e.g., a PLC) designed to read and interpret incoming signals from various input devices.

Programming Device

A hardware tool used to input or modify instructions and data in a programmable electronic system.