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

question 84

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 720,000 boxes.If Beta and Lambda agree to transfer boxes, what is the floor of the bargaining range and which division sets it?

• A) $2.00; Beta
• B) $1.35; Beta
• C) $1.48; Lambda
• D) $1.35; Lambda
• E) $1.80; Lambda

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Definitions:

Mineralcorticoids

A class of corticosteroids that primarily regulate electrolyte and water balance by affecting ion transport in the kidneys.

Glucocorticoids

A class of corticosteroids that play a role in glucose metabolism, immune response suppression, and stress response.

Androgens

A group of hormones that play a role in male traits and reproductive activity; present in both males and females.

Adrenal Gland

An endocrine gland that produces various hormones including adrenaline and steroids aldosterone and cortisol.