Division D Has Asked Division C of the Same Company

question 23

Multiple Choice

Division D has asked Division C of the same company to supply it with 4,000 units of part L763 this year to use in one of products. Division D has received a bid from an outside supplier for the parts at a price of £26.00 per unit. Division C has the capacity to produce 15,000 units of part L763 per year. Division C expects to sell 12,000 units of part L763 to outside customers this year at a price of £29.00 per unit. To fill the order from Division D, Division C would have to cut back its sales to outside customers. Division C produces part L763 at a variable cost of £20.00 per unit. The cost of packing and shipping the parts for outside customers is £1.00 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division D.
-The optimal range of transfer prices is between

• A)£22 to £26
• B)£26- £28
• C)£19-£22
• D)£22-£36

---

Definitions:

Hysteric Disorders

Psychological disorders characterized by conversion of psychological stress into physical symptoms without an apparent physical cause.

Limbic System

A conceptual system controlling affective and motivated behaviors and certain forms of memory with key anatomy lying between the neocortex and brainstem; includes the cingulate cortex, amygdala, and hippocampus, among other structures.

Sigmund Freud

Sigmund Freud was an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Dorsal Frontal Cortex

A region of the frontal lobes of the brain implicated in executive functions such as planning, reasoning, and problem-solving.