Fragrance Pty Ltd Has Two Divisions: the Cologne Division and the Bottle

question 14

Multiple Choice

Fragrance Pty Ltd has two divisions: the Cologne Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost per unit is $2.00 and shipping costs are $0.10 per unit. The Bottle Division's external sales price is $3.00 per unit. No shipping costs are incurred on sales to the Cologne Division. The Cologne Division can purchase similar bottles in the external market for $2.50.
Assume the Bottle Division has no excess capacity and can sell everything produced externally. What is the maximum amount Cologne Division would be willing to pay for the bottles?

• A) $2.00
• B) $2.10
• C) $2.50
• D) $2.90

---

Definitions:

Projective Measure

A type of psychological test in which the subject's response to ambiguous stimuli reveals hidden emotions and internal conflicts.

Abstract Painting

A form of art that does not attempt to represent external reality, but seeks to achieve its effect using shapes, colors, and textures.

Unconscious Impulses

Desires or urges that lie outside of conscious awareness, influencing behavior without one's conscious recognition.

Weak Situation

Contexts in which social norms, cues, or other situational factors are ambiguous, allowing for a greater variety of behaviors and making personal dispositions more influential.