1B2J MANHATTAN CORPORATION HAS SEVERAL DIVISIONS THAT OPERATE AS DECE...

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.