The Fabrication Division of American Car Company Has Offered to Purchase

question 30

Essay

The Fabrication Division of American Car Company has offered to purchase 90,000 batteries from the Electrical Division for $104 per unit.At a normal volume of 250,000 batteries per year,production costs per battery are as follows:

The Electrical Division has been selling 250,000 batteries per year to outside buyers at $136 each;capacity is 350,000 batteries per year.The Fabrication Division has been buying batteries from outside sources for $130 each.
Required:
a.Should the Electrical Division manager accept the offer? Explain.
b.From the company's perspective,will the internal sales be of any benefit? Explain.

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Definitions:

Horizontal Structure

An organizational design that focuses on teamwork and collaboration rather than a traditional hierarchical system, often found in flatter organizations.

Division of Labour

The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.

Personal Coordination

The organization and management of an individual's tasks and responsibilities to achieve efficiency and fulfill objectives.

Tall Structures

Organizational hierarchy models characterized by multiple layers of management, resulting in longer communication paths and potential delays in decision-making.