The Following Information Is Available for the Two Divisions of MAC

question 118

Essay

The following information is available for the two divisions of MAC Co.: $$\begin{array} { | l | r | } \hline \text { Division } A & \\\hline \text { Selling price to outside market } & \$ 55 \\\hline \text { Standard unit-level costs } & 35 \\\hline \text { Dwision B } & \\\hline \text { Selling price of finished product } &\$95 \\\hline \text { Standard unit-level costs for Division B } &2 5 \\\hline\end{array}$$
Division A has no excess production capacity.Required:
1)In order to ensure the best use of the productive capacity of A,what transfer price should be set by Division A and what effect does this transfer price have on the overall margin for the company? Is the answer goal congruent under the general rule?
2)Should Division B accept a special order for its product if the selling price is reduced to $70.Use your answer from #1 and explain.3)Would your answer to #2 change if Division A had excess capacity? Explain.

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Definitions:

Social Cohesion

The bonds and mutual trust that bring members of a society together, enabling them to cooperate and live harmoniously.

Dysfunctional

Referring to something that is not operating normally or effectively, especially in the context of social institutions or processes.

Bloodshed

The killing or wounding of people, typically on a large scale during conflicts or violence.

Religious Fervour

Intense and passionate devotion or zeal towards one's religion.