Assume that the Entertainment Division is able to purchase a large quantity of video cards from an outside source at $8.70 per unit.The Video Cards Division,having excess capacity,agrees to lower its transfer price to $8.70 per unit.This action would
A)optimize the profit goals of the Entertainment Division while subverting the profit goals of Parkside Inc.
B)allow evaluation of both divisions on the same basis.
C)subvert the profit goals of the Video Cards Division while optimizing the profit goals of the Entertainment Division.
D)optimize the overall profit goals of Parkside Inc.

Question

Quizplus · Accepted Answer

Lowering the transfer price to match the external purchase price allows the company to keep the transaction internal, optimizing overall profit goals by utilizing excess capacity and avoiding external purchases.

Assume That the Entertainment Division Is Able to Purchase a Large