128. CSO: 1B2b LOS: 1B2j
Manhattan Corporation has several divisions that operate as decentralized profit centers.
At the present time, the Fabrication Division has excess capacity of 5,000 units with
respect to the UT-371 circuit board, a popular item in many digital applications.
Information about the circuit board follows.
Market price $48
Variable selling/distribution costs on external sales 5
Variable manufacturing cost 21
Fixed manufacturing cost 10
47
Manhattan’s Electronic Assembly Division wants to purchase 4,500 circuit boards either
internally, or else use a similar board in the marketplace that sells for $46. The
Electronic Assembly Division’s management feels that if the first alternative is pursued, a
price concession is justified, given that both divisions are part of the same firm. To
optimize the overall goals of Manhattan, the minimum price to be charged for the board
from the Fabrication Division to the Electronic Assembly Division should be
a. $21.
b. $26.
c. $31.
d. $46.
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