(Appendix 11A)Division X Makes a Part That It Sells to Customers

question 159

Multiple Choice

(Appendix 11A) Division X makes a part that it sells to customers outside of the company.Data concerning this part appear below:
Division Y of the same company would like to use the part manufactured by Division X in one of its products.Division Y currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division X.Division Y requires 5,000 units of the part each period.Division X can already sell all of the units it can produce on the outside market.What should be the lowest acceptable transfer price from the perspective of Division X?

• A) $16.
• B) $50.
• C) $66.
• D) $75.

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Definitions:

Hypergamy

The action of marrying or forming a sexual relationship with a person of a superior sociological or educational background.

Heterogamous

Referring to marriages or relationships between individuals who come from different backgrounds, whether cultural, racial, religious, or socioeconomic.

Cinderella Stories

Narratives that demonstrate a dramatic rise from poor or difficult circumstances to success, happiness, or fulfillment.

Middle-Class Lifestyle

A way of living characterized by financial stability, homeownership, access to education, and the ability to afford recreational activities, typical of the middle class.