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Corrugated, Inc The Box Division Has Capacity to Make 500,000 Boxes Per

question 44

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Corrugated, Inc.Corrugated, Inc. has many divisions that are evaluated on the basis of ROI. One division, the Box Division, makes boxes. The Candy Division makes candy and needs 50,000 boxes per year. The Box Division incurs the following costs for one box:  Direct materials $0.20 Direct labour 0.70 Variable overhead 0.10 Fixed overhead 0.23 Total $1.23\begin{array} { l c } \text { Direct materials } & \$ 0.20 \\\text { Direct labour } & 0.70 \\\text { Variable overhead } & 0.10 \\\text { Fixed overhead } & \underline { 0.23 } \\\text { Total } & \underline { \$ 1.23 }\end{array} The Box Division has capacity to make 500,000 boxes per year. The Candy Division currently buys its boxes from an outside supplier for $1.40 each (the same price that the Box Division receives) .
-Refer to Corrugated, Inc. Assume that Corrugated, Inc. allows division managers to negotiate the transfer price. The Box Division is producing 400,000 boxes. Suppose the Box Division and the Candy Division agree to transfer boxes. What would be the ceiling of the bargaining range, and which division sets it?

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Definitions:

Suppliers

Businesses or individuals that provide goods or services to another entity, typically within a supply chain.

Proposal Process

The steps involved in preparing and submitting a proposal, typically including drafting, reviewing, and approval stages.

Contract For Delivery

A legal agreement specifying the terms and conditions under which goods or services will be delivered.

Decision-Making Process

The series of steps or stages involved in selecting a course of action from among multiple alternatives.

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