Division X Makes a Part That It Sells to Customers

question 7

Multiple Choice

Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into outside sales. According to the formula in the text, what is the lowest acceptable transfer price from the standpoint of the selling division?

• A)$50
• B)$49
• C)$46
• D)$30

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Definitions:

Work

Work is any set of activities performed by individuals that involves effort, skill, or both, typically with the aim of producing goods or services or achieving a particular outcome.

Attitude-Behavior Linkage

The relationship between an individual's attitudes and their corresponding behaviors, highlighting how different attitudes predict specific behaviors.

Emotional Intelligence

The ability to recognize, understand, and manage one's own emotions and those of others, crucial for effective communication, leadership, and relationships.

General Attitudes

The overall feelings or opinions a person has about different aspects of their environment, life, or work, which can influence their behaviors and perceptions.