Figure 4 the Simonds Division Produces a Component That Is Used by Used

question 36

Multiple Choice

Figure 4
The Simonds Division produces a component that is used by the Allen Division. The cost of manufacturing the component is as follows:
^aBased on a practical volume of 400,000 components
Other costs incurred by the Simonds Division are as follows:
The component usually sells for £35 in the external market. The Simonds Division is capable of producing 500,000 components per year; however, only 400,000 components are expected to be sold next year. The variable selling expenses are avoidable if the component is sold internally.
The Allen Division has been buying the same component from an external supplier for £34 each. The Allen Division expects to use 50,000 units of the component next year. The manager of the Allen Division has offered to buy 50,000 units from the Simonds Division for £22.50 each.
-Refer to Figure 4. The maximum transfer price that the Allen Division would be willing to pay is

• A) £20.00
• B) £25.00
• C) £26.50
• D) £34.00

Examine the legal and ethical considerations in scenarios involving undue influence, duress, and economic pressures.

Understand the conditions under which contracts can be rescinded due to mistakes, fraud, or duress.

Differentiate between innocent and fraudulent misrepresentation and their respective remedies.

Analyze the legal standards for establishing duress and its effects on contract enforceability.

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Definitions:

Profit Maximization

The process or strategy of adjusting the production and sale of goods or services to achieve the highest possible profit.

Material Charges

Fees associated with the cost of raw materials or goods used in the production of products or services.

Delivery Costs

The expenses associated with transporting goods from one place to another, including packaging, postage, and handling fees.

Reference Price

The price that a consumer considers reasonable or compares with when evaluating a potential purchase.