Oglesby Service Corporation has three divisions that are treated as profit centers. The Printing division provides services to the other two divisions, as well as to external customers. In the middle of the year, the Accounting division ran out of brochures and needed to place an order. The Printing division bid $2,500 for the order; another vendor in town bid $1,600. Although the Accounting division's manager wanted to keep the business within the corporation, the $900 difference between the bids was too high to ignore. The Printing division's manager argued that variable costs on the project were $1,700 and fixed costs were $700, so the $2,500 price only returns $100 on the job. Both managers agreed that the Printing division's products were of a greater quality than the local competitor's, but the competitor's quality was adequate for the Accounting division's purposes.

Using Exhibit 10-11 as a guide, identify the options available to the Printing and Accounting divisions. Which option would provide the greatest return (or least cost) to the corporation? Support your answer with calculations.

  • CreatedFebruary 21, 2014
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