Mandolin Company Has Two Divisions

question 10

Multiple Choice

Mandolin Company has two divisions. Division A is interested in purchasing 10,000 units from Division B. Capacity is available for Division B to produce these units. The per unit market price is $30 per unit, with a variable cost of $17. The manager of Division A has offered to purchase the units at $15 per unit. In an effort to make this transfer price beneficial for the company as a whole, what is the range of prices that should be used during negotiations between the two divisions?

• A) $15 to $30
• B) $15 to $17
• C) over $30
• D) $17 to $30

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Definitions:

Market War

Intense competitive actions among companies in the same industry to gain market share, often involving aggressive pricing, advertising, and product launches.

Product-line Pricing

A marketing strategy that involves setting different price points for various items in a product line based on their features or quality levels.

Bundle Pricing

A pricing strategy where multiple products or services are packaged together and sold at a single price, often lower than the total cost of buying them separately.

Tortilla Chip

A snack food made from corn tortillas cut into wedges and then fried or baked, commonly served with dips or used in dishes like nachos.