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.

---

Definitions:

Maturity

The date on which the principal amount of a loan, bond, or other financial instrument must be repaid to creditors.

Maker

In the context of finance, refers to the entity that issues or creates a financial instrument, such as a check or note.

Maturity Value

Maturity value is the amount payable to an investment's holder at its maturity date, including the principal and any remaining interest.

Note

A written agreement acknowledging a debt and promising repayment.