Division a Produces a Part with the Following Characteristics Division B, Another Division in the Company, Would Like to \text

question 33

Multiple Choice

Division A produces a part with the following characteristics:
$\begin{array}{|l|r|}\hline \text { Capacity in Units } & 50,000 \text { units } \\\hline \text { Selling Price per Unit } & \$ 30 \\\hline \text { Variable Costs per Unit } & \$ 18 \\\hline \text { Fixed Costs per Unit } & \$ 3 \\\hline\end{array}$
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 which of the following?

• A) $20.
• B) $27.
• C) $28.
• D) $29.

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Definitions:

Condominium

A type of real estate divided into individual units, each separately owned, surrounded by common areas jointly owned.

Royalties

Payments made to the owners of intellectual property, minerals, or other assets for the right to use or sell their property.

Copyrights

Legal rights granted by the government to creators for the protection of their original works for a certain period.

Coal Mines

Locations where coal is extracted from the earth, often involving extensive mining operations.