High Division Sells a Part Internally to Low Division

question 64

Multiple Choice

High Division sells a part internally to Low Division.Low Division uses the part to produce inexpensive products sold at discount stores.High Division incurs costs of $1.50 per part,while Low Division incurs additional costs of $4.80 per product.High Division sells the part to Low Division for $2.00 per part.
Low Division can purchase the part from an outside supplier for $1.00 per part,but does not accept the offer.The final product is sold to external customers for $8.00 each.Which of the following formulas correctly reflects the company's operating income?

• A) $8.00 - $1.50 - $4.80 - $2.00 - $1.00 = $(1.30)
• B) $8.00 - $1.50 - $4.80 = $1.70
• C) $8.00 - $4.80 - $2.00 = $1.20
• D) $8.00 - $1.50 = $6.50

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Definitions:

Marketing Expenditures

The total amount of money a company spends on creating and executing its marketing strategies.

Resource-intensive

Describing activities, processes, or industries that require a large amount of resources (such as capital, time, or energy) to produce goods or services.

Family Branding

Marketing strategy that involves selling several related products under one overarching brand name.

Brand Ambiguity

The uncertainty or confusion that consumers experience due to unclear brand messages or inconsistent brand image, which can affect brand perception negatively.