Colonial Computing Systems Colonial Computing Systems Manufactures and Sells Various Computer Products and Computer

question 43

Multiple Choice

Colonial Computing Systems
Colonial Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular mouse from Production at $50 per unit.The Production Division is considering raising the price to $60 per unit.The Production Division's costs related to the mouse production is as follows:

The Marketing Division handles the promotion and distribution of the mouse purchases from the Production Division and sells each mouse for $100.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 1,500 units per month.Marketing Division can buy the same mouse from outside suppliers for $60.If the Marketing Division purchases the mouse from outside suppliers,the facilities the Production Division uses to manufacture the mouse would remain idle.
Refer to Colonial Computing Systems.The Production Division is operating at maximum capacity because of strong worldwide demand for the product.What should be the mouse transfer price between the Production Division and Marketing Division in order for Colonial to optimize profits?

• A)$ 50
• B)$ 55
• C)$ 60
• D)$100

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Definitions:

Vascular Headaches

A category of headaches believed to be related to the dilation or constriction of blood vessels in the head, such as migraines.

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Pain produced by sustained muscle contractions in the neck, shoulders, scalp, and face, as well as by activity in the central nervous system.

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Diathesis-Stress Model

A psychological theory that explains behavior as both a result of biological and genetic vulnerability and environmental stress factors.