The Axle Division of Becker Company Produces Axles for Off-Road

question 65

Multiple Choice

The Axle Division of Becker Company produces axles for off-road sport vehicles.One-third of Axle's 30,000 unit output is sold to an internal division of Becker;the remainder is sold to outside customers.Axles' estimated operating profit for the year is: The internal division has an opportunity to purchase 10,000 axles of the same quality from an outside supplier on a continuing basis.The purchase price would be $13.00.If the Axle Division is now operating at full capacity and can sell all its units to outside customers at the present selling price,what is the minimum selling price that Axle should accept from the internal division?

• A)$10.00.
• B)$13.00.
• C)$15.00.
• D)$20.00.

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Definitions:

Income Decrease

Income decrease refers to a reduction in the amount of money earned by an individual or received by a household, affecting their ability to spend and save.

Giffen Goods

A type of product that paradoxically experiences increased demand as its price rises, seemingly contrary to the basic law of demand due to the effect on consumption of essential goods.

Inferior Goods

Products whose demand decreases as the income of consumers increases, due to the preference for higher-quality substitutes.

Income Effect

The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.