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

question 34

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.
-Under what conditions would transferring products or services at market prices lead to optimal decisions within the organization?

• A)when the immediate market is a monopoly
• B)when there is interdependence between subunit divisions
• C)when there is excess capacity
• D)when the immediate market is not perfectly competitive, and there is interdependence between subunit divisions
• E)when the immediate market is only somewhat competitive and there is excess capacity

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Definitions:

Factory Overhead

All expenses related to production that aren't direct materials or direct labor costs.

Per-Unit Cost

The cost associated with producing or acquiring a single unit of product.

Finished Goods Account

An inventory account that holds the value of products that are completed and ready for sale.

Controlling Account

A general ledger account that summarizes the total balances of several subsidiary accounts, facilitating the organization and tracking of financial information.