The Plantaganet Company is a large conglomerate that has 40 divisions. Division X wants to buy a component for its final product and receives bids from separate external suppliers of f500 and f550. The supplier who bid f550 will buy raw materials for flOO from Division Z, which has excess capacity. The variable costs associated with the raw materials is f40. The supplier who bid f500 will not buy any raw materials from Plantaganet.

Division Y is working at full capacity, but can provide the component part to X at a price of f550. Division Y purchases its rawmaterial requirements externally from an unrelated party at f50 and incurs additional variable costs of 000.

Required:

(a) to identify the potential work flows and forms of interdependence;

(b) to discover which offer Division X should choose in the company's best interests;

(c) to outline the arguments likely to be heard in seeking to apply the corporate optimal decision;

(d) to decide at what price the transactions should take place.