Bill's Computer Parts Has Two Decentralized Divisions,Hardware and Pre-Fab

question 33

Essay

Bill's Computer Parts has two decentralized divisions,Hardware and Pre-Fab.Pre-Fab has always purchased certain units from Hardware at $230 per unit.Because Hardware plans to raise the price to $260 per unit,Pre-Fab desires to purchase these units from outside suppliers for $230 per unit.Hardware's costs follow: variable costs per unit,$200;annual fixed costs,$30,000.Annual production of these units for Pre-Fab is 1,500 units.If Pre-Fab buys from an outside supplier,the facilities Hardware uses to manufacture these units would remain idle.
Required:
What would be the result if Bill's Computer Parts' management enforces a transfer price of $260 per unit between Hardware and Pre-Fab?

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Definitions:

Two-way symmetrical

A public relations model emphasizing mutual understanding and balanced power between an organization and its stakeholders through dialogue and negotiation.

Effective Communications

The art and technique of sharing information in a way that the message is successfully received, understood, and responded to.

Symbolic-interpretive

An approach in social science that focuses on understanding the role of symbols, meanings, and interpretations in human behavior and organizational culture.

James Grunig

A prominent figure in the field of public relations, known for his theories on public relations models, especially the two-way symmetrical model.