Multiple Choice
Parkside Inc.has several divisions that operate as decentralized profit centers.Parkside's Entertainment Division manufactures video arcade equipment using the products of two of Parkside's other divisions.The Plastics Division manufactures plastic components,one type that is made exclusively for the Entertainment Division,while other less complex components are sold to outside markets.The products of the Video Cards Division are sold in a competitive market;however,one video card model is also used by the Entertainment Division.The actual costs per unit used by the Entertainment Division follow: (CMA adapted) 
The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25 per unit on the open market.The market price of the video card used by the Entertainment Division is $10.98 per unit.A per-unit transfer price from the Video Cards Division to the Entertainment Division at full cost,$9.15,would:
A) allow evaluation of both divisions on a competitive basis.
B) satisfy the Video Cards Division's profit desire by allowing recovery of opportunity costs.
C) provide no profit incentive for the Video Cards Division to control or reduce costs.
D) encourage the Entertainment Division to purchase video cards from an outside source.
Correct Answer:
Verified
Correct Answer:
Verified
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