Use the Information Below to Answer the Following Question(s)

question 177

Multiple Choice

Use the information below to answer the following question(s) .Soft Cushion Company is highly decentralized.Each division is empowered to make its own sales decisions.The Assembly Division can purchase cushion stuffing from the Production Division or from external suppliers.The Production Division has been the major supplier of stuffing in recent years.The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $20 per kilogram for the next year.The Production Division recently increased its unit price to $40.The manager of the Production Division presented the following information; variable cost $32, fixed cost $8, to top management in order to attempt to force the Assembly Division to purchase the stuffing internally.The Assembly Division purchases 20,000 kg per month.
-The seller of product A has idle capacity and has no alternative use for the excess capacity.The seller can sell each unit at $10.Outlay cost is $2.What is the opportunity cost of selling internally?

• A)$0
• B)$8
• C)$10
• D)$12
• E)$16

---

Definitions:

Fluid Intelligence

The ability to use reasoning and solve new problems without relying on knowledge previously gained.

Reorganizing Stage

A phase in various processes (e.g., psychological development, corporate restructuring) where existing structures or strategies are revised and restructured.

Solving Practical Problems

The process of finding solutions to real-world issues or challenges through logical reasoning and practical methods.

Acquiring Knowledge

The process of absorbing, understanding, and retaining new information through various methods such as observation, studies, and experiences.