Division X Makes a Part That It Sells to Customers

question 21

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:

Expand Into

A strategy or action by a company to enter new markets, areas, or fields in order to grow its business and reach.

High-end CRM

Customer Relationship Management software that offers advanced features and functionalities targeted at businesses with complex needs.

Analytical CRM

A component of customer relationship management focusing on analyzing customer data and behaviors to improve business relationships.

Customer-touching Applications

Software applications, often part of CRM systems, that allow customers to directly interact with a company's services or its information.