The Pen and Pencil Divisions Are Part of the Same

question 99

Multiple Choice

The Pen and Pencil Divisions are part of the same company. Currently the Pencil Division buys a part ingredient from Pen for $96. The Pen Division wants to increase the price of the part it sells to Pencil by $24 to $120. The manager of Pencil has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Pencil can buy the part from an outside supplier for $112. The cost data for the Pen Division is as follows:
If Pen ceases to produce the parts for Pencil, it will be able to avoid one-third of the fixed manufacturing overhead. The Pen Division has excess capacity but no alternative uses for its facilities.
-What is the minimum transfer price that should be charged?

• A) $120.00
• B) $112.00
• C) $97.20
• D) $94.00

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Definitions:

Internal Branding

The process of building a brand's values and culture among the company's employees to ensure brand consistency.

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The practice of maintaining uniformity in the brand's message, values, and visual elements across all marketing channels to reinforce brand identity.

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