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portCo products is a divisionalized furniture manufacturer. The divisions are autonomous segments,with each being responsible for its own sales,costs of operations,working capital management,and equipment acquisition. Each divison serves a different market in furniture industry. Because the markets and products of the divisions are so different,there have never been any transfers between divisions.
The Commercial Division manufactures equipment and furniture that is purchased by the restaurant industry. The division plans to introduce a new line of counter and chair units that feature a cushioned seat for the counter chairs. John Kline, the divisional manager,has discussed the manufacture of the cushioned seat with Russ Fiegel of the office Division They both believe a cushioned seat currently made by the Office Division for use on its deluxe office stool could be modified for use on the new counter chair. Consequently,John has asked Russ for a price for 100 unit lots of the cushioned seat.The following conversation took place about the price to charged for the cushioned seats.
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