Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication Division has excess capacity of 5,000 units with respect to the UT-371 circuit board, a popular item in many digital applications. Information about the circuit board follows.

Market price.............................................................................................................$48

Variable selling/distribution costs on external sales.............................................5

Variable manufacturing cost.....................................................................................21

Fixed manufacturing cost..........................................................................................10

Manhattan’s Electronic Assembly Division wants to purchase 4,500 circuit boards. It can purchase the boards in the marketplace for $46 or buy them internally from the Fabrication Division. The Electronic Assembly Division’s management feels that if the second alternative is pursued, a price concession is justified, given that both divisions are part of the same firm. The best process to determine the price ultimately charged by the Fabrication Division to the Electronic Assembly Division for the circuit board is to:

a. Have top management specify the price.

b. Establish the price through an arbitration committee.

c. Establish the price through negotiations between the managers of the two divisions.

d. Set the price equal to the price that would be charged if the Fabrication Division had no excess capacity.