Bernice Company's records reveal the following:

\begin{array} { l }\text { Division X }\\ \text {Market price of finished component to outsiders }&\$ 32 \text { per unit } \\ \text {Variable costs per component }&\$ 24 \text { per unit } \\\end{array}

\begin{array} { l }\text { Division Y }\\ \text {Sale price of finished product }&\$ 42 \text { per unit } \\\end{array}

Variable costs:

\begin{array}{ll}\text { Division } X(1 \text { component }) & ? \\\text { Division } Y \text { Assembly } & 9 \text { per unit } \\\text { Division } Y \text { Packaging } & 4 \text { per unit }\end{array}

Division Y wants to buy the component from Division X.The variable costs of Division Y will be incurred whether it buys the component from Division X or from an outside supplier.Assume Division X has excess capacity.Division Y can buy the component from an outside supplier for $32 per unit.What is the lowest transfer price per unit at which Division X would be willing to sell to Division Y?
A) $8
B) $22
C) $24
D) $32

Decentralization May Increase a Firm's Costs Because ________

Multiple Choice

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