Division S Sold a Part to Both Division P and Outside

question 41

Multiple Choice

Division S sold a part to both Division P and outside customers last year. The revenues from these sales were $30,000 (1,000 units) and $35,000 (1,000 units) , respectively. Next year, S plans to increase the unit sales price to $42 and wants a proportionate increase in the sales price to Division P. The unit costs are $9 variable and $15 fixed. If Division P does not agree to the price increase, 50% of Division S's fixed costs will be eliminated.
What is the highest price Division P would be willing to pay for external purchases?

• A) $30.00
• B) $36.00
• C) $16.50
• D) $28.50

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Definitions:

Split-object Image

A term from psychology, particularly object relations theory, indicating how an individual perceives others as either entirely good or entirely bad, without an integrated view.

Object Integration

The process of combining different elements or pieces of information into a cohesive whole.

Conscious Mind

The aspect of the mind that involves awareness of thoughts, feelings, and surroundings in the present moment.

Unconscious Mind

A part of the mind that is not in forefront awareness but influences thoughts, feelings, and behaviors.