Asked by Christian Samuel on Apr 24, 2024
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Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below: Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.Suppose that Division S can sell all that it can produce to outside customers. If Division S sells to Division B at a price of $28 per unit, the company as a whole will be:
A) worse off by $80,000 each period.
B) worse off by $70,000 each period.
C) better off by $20,000 each period.
D) worse off by $20,000 each period.
Selling Division
The division or section of a company responsible for sales activities and interfacing with customers to sell products or services.
Buying Division
A department or segment within a company responsible for purchasing goods, materials, or services.
Outside Supplier
An external entity that provides goods or services to a company, often used when the company cannot produce these items in-house.
- Appraise the aggregate effect of transfer pricing policies on an enterprise's net operating profit.
Verified Answer
Learning Objectives
- Appraise the aggregate effect of transfer pricing policies on an enterprise's net operating profit.
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