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| 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 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. The best process to determine the price ultimately charged by the Fabrication Division to the Assembly Division for the circuit board is to A. establish the price through negotiations between the Fabrication's and Electronic Assembly's Division management. B. establish the price by top management. C. set the price equal to the price that would be charged if the Fabrication Department had no excess capacity. D. establish the price by an arbitration committee. |