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

question 32

Multiple Choice

Dukes Computing Systems
Dukes 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 motherboard from Production at $65 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the motherboard production is as follows:

The Marketing Division handles the promotion and distribution of the motherboard purchases from the Production Division and sells each motherboard for $125.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same motherboard from outside suppliers for $75.
Refer to Dukes Computing Systems.The Production Division is operating at maximum capacity because of strong worldwide demand for the product and the Production Division can sell all it produces to outside customers for $75 per motherboard.
What should be the motherboard transfer price between the Production Division and Marketing Division in order for Dukes' to optimize profits?

• A)$ 55
• B)$ 65
• C)$ 75
• D)$125

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Definitions:

Organizational Principles

Fundamental beliefs, concepts, or rules that help govern the behavior, decision-making, and actions of an organization, guiding its culture and operations.

Business Ethics

The study of proper business policies and practices regarding potentially controversial subjects such as corporate governance, insider trading, bribery, discrimination, and corporate social responsibility.

Profitable New Markets

Emerging or untapped segments of the economy where businesses can enter and establish themselves to generate significant profit.

Existing Equipment

Machinery or tools that are currently owned or in use by an organization or individual.