Division X Makes a Part with the Following Characteristics

question 31

Multiple Choice

Division X makes a part with the following characteristics: Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division X refuses to accept the $17 price internally and Division Y continues to buy from the outside supplier, the company as a whole will be:

• A) worse off by $70,000 each period.
• B) better off by $10,000 each period.
• C) worse off by $60,000 each period.
• D) worse off by $20,000 each period.
• E) better off by $60,000 each period.

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Definitions:

Limited Jurisdiction

The authority vested in certain courts to hear and decide only specific types of legal cases, often restricted by case type, monetary value, or geography.

Small Claims Court

A court that handles disputes involving a small amount of money, offering a quick and simple resolution process without the need for a lawyer.

Domestic Relations Court

A court specializing in cases related to family matters such as divorce, child custody, and adoption.

Limited Jurisdiction

A legal term referring to courts that can hear only specific types of cases, often restricted by the amount in controversy, the type of case, or geographical area.