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Peppertree Company has two divisions, East and West. Division East manufactures a component that Division West uses. The variable cost to produce this component is $1.58 per unit; full cost is $1.98. The component sells on the open market for $5.07. Assuming Division East has excess capacity, what is the lowest price Division East will accept for the component

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Answer:

$5.07

Explanation:

The Division East is manufacturing a component that the Division West uses. Since managers of these divisions are evaluated separately on the performance of their divisions,Division East will accept at minimum the price equal to that on that its output is fetching in an open market.

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