sequently, more materials and labour were needed, and rework and spoilage were charged to overhead. You ask for information on the cost of quality and customer satisfac tion, and you receive the information shown in Exhibits 2 and 3. You are also informed by the divisional general manager that EL wants a higher price for the components being supplied to Sung. The general manager at Sung is opposed to any increase in price paid to EL because the market price is less than what EL currently charges. (You confirm with an inde- pendent source that EL is presently charging Sung five percent over the market price for the components.) Two days later, the CEO introduces you to the general manager of EL. The financial statements for EL are contained in Exhibit 4. You learn that all of EL's production goes to Sung at a markup over costs sufficient to yield a 20 percent ROI, which is Dennison's markup for setting transfer 2