Division South Does Not Have Excess Capacity to Produce Product

question 7

Multiple Choice

Division South does not have excess capacity to produce Product Y.The division can sell Product Y for $10 per unit outside the company.Variable costs are $6 per unit.Division North wants to purchase Product Y from Division South to use in Product ZZ.The selling price of Product ZZ is $25 per unit and variable costs to finish the product after the transfer are $12 per unit.An outside supplier will sell Product Y for $12 per unit.What is the maximum price Division North will pay for Product Y?

• A) $12 per unit
• B) $13 per unit
• C) $25 per unit
• D) none of the above

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Definitions:

Flow

The feeling of oneness with an activity that allows an individual to uniquely experience an event or activity by becoming totally engaged in the process; term was coined by Mihaly Csikszentmihalyi.

Work

The effort applied towards completing tasks or producing goods and services, often for compensation.

Arthur Koestler

A British-Hungarian writer known for works exploring the intersection of science, politics, and creativity, including the book "The Act of Creation."

Habit

A regular behavior or routine that is performed repeatedly and often automatically.