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

question 175

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 that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into its sales to outside customers.From the point of view of Division A,any sales to Division B should be priced no lower than which of the following?

• A) $17.
• B) $18.
• C) $29.
• D) $30.

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Definitions:

Central Point of Accountability

A single, designated position or person within an organization responsible for ensuring tasks or projects are completed as required.

Market Area

The geographic region or demographic group served by a business or organization.

Divisional Structure

An organizational layout where operations are divided into separate divisions based on product, service, market, or geographic region, each with its own set of functions.

Same Product

Identical items or services offered under different names or by different companies, often with no significant difference in function or quality.