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Giga-Stuff, Inc. has a number of divisions. One division, Sophistosand, makes component X, which is used in the manufacture of DVD players. Another division, Videostuff, makes DVD players and needs 60,000 units of component X per year. Sophistosand incurs the following costs for one unit of component X:
Sophistosand has the capacity to make 400,000 units of component X per year but, due to a soft market, plans to produce and sell only 320,000 units next year. Videostuff currently buys component X from an outside supplier for $2.50 each (the same price that Sophistosand receives) .
-Refer to the Figure.Assume that Giga-Stuff allows negotiated transfer pricing.What is the floor of the bargaining range,and which division sets it?
Fiduciary Duties
Obligations one party has to act in the best interest of another party, such as a trustee towards a beneficiary.
General Partner
A type of ownership in a partnership where the general partner is responsible for the management of the partnership and is personally liable for its debts.
Limited Partnership
A partnership where some members have limited liabilities to the amount they invest, while at least one partner has unlimited liability.
Extinguishing
The act of putting an end to something, such as extinguishing a debt, a legal obligation, or a fire.
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