Elite Inchas Many Divisions That Are Evaluated on the Basis of of Return

question 38

Multiple Choice

Elite Inc.has many divisions that are evaluated on the basis of return on investment (ROI) .One division, Beta, makes boxes.A second division, Lambda, makes chocolates and needs 90,000 boxes per year.Beta incurs the following costs for one box:

Beta has the capacity to make 720,000 boxes per year.Lambda currently buys its boxes from an outside supplier for $2.00 each (the same price that Beta receives) .
- Assume that Elite Inc.allows division managers to negotiate transfer price.Beta is producing 650,000 boxes.If Beta and Lambda agree to transfer boxes, what is the floor of the bargaining range and which division sets it?

• A) $1.80; Beta
• B) $1.48; Beta
• C) $1.48; Lambda
• D) $1.35; Lambda
• E) $1.60; Beta

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Definitions:

Dietary Supplements

Products containing nutrients or other ingredients intended to supplement the diet, such as vitamins, minerals, herbs, or amino acids.

Warning

A statement or event that alerts individuals about a potential danger, error, or problem.

Kosher Meals

Food prepared according to Jewish dietary laws, including the avoidance of certain ingredients and the separation of meat and dairy products.

Jewish

Pertaining to the religious, cultural, or ethnic group traditionally linked to the Hebrews or Israelites and their descendants.