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Clariton Corporation has two divisions, Kissimmee and Grant, and evaluates management on the basis of return on investment. Kissimmee currently makes a part that
Clariton Corporation has two divisions, Kissimmee and Grant, and evaluates management on the basis of return on investment. Kissimmee currently makes a part that it sells to both Grant and outsiders. Selected data follow. Selling price to Grant $ 361 Variable cost Fixed costs 27 91,000 Kissimmee is seeking an increase in its selling price to $39 per unit because of rising costs. Grant can obtain comparable units from an outside supplier for $37; however, if Grant uses the supplier, Kissimmee will have idle capacity because of an inability to increase sales to outsiders. From the perspective of Clariton Corporation: Multiple Choice Kissimmee should continue to do business with Grant and charge $39 per unit. Kissimmee should continue to do business with Grant and charge $36 per unit. Kissimmee should continue to do business with Grant because Kissimmee's variable cost per unit is only $27 Multiple Choice. Kissimmee should continue to do business with Grant and charge $39 per unit Kissimmee should continue to do business with Grant and charge $36 per unit. Kissimmee should continue to do business with Grant because Kissimmee's variable cost per unit is only $27. Grant should do business with the outside supplier. Grant should split its business between Kissimmee and the outside supplier.
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