Division a Makes a Part That It Sells to Customers

question 130

Multiple Choice

Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $1 lower. What is the lowest acceptable transfer price Division A should accept?

• A) $40
• B) $38
• C) $30
• D) $29
• E) $10

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Definitions:

Lack of Access

The unavailability or inability to obtain necessary resources, services, or opportunities, often due to economic, social, or geographical barriers.

Lack of Friends

A situation where an individual experiences a deficiency in social connections or meaningful friendships.

Customer Problems

Issues or challenges faced by customers that businesses aim to solve through their products or services.

Multisided Markets

Markets with two or more customer segments that are mutually independent of each other.