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Gilbert Equipment

Gilbert Equipment, SA a French transportation equipment manufacturer, is heavily decentralized. Each division head has full authority on all decisions regarding sales to internal or external customers. The Provence Division has always acquired a certain equipment component from the Normandy Division. However, when informed that the Normandy Division was increasing its unit price to E325, the Provence Division's management decided to purchase the component from outside suppliers a t the price of E300.

The Normandy Division had recently acquired some specialized equipment that was used primarily to make this component. The manager cited the resulting high depreciation charges as the justification for the price boost. He asked the president of the company to instruct the Provence Division to buy from Normandy at the E325 price. He supplied the following data to back his request:

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Gilbert Equipment, SA a French transportation equipment manufacturer, is heavily decentralized. Each division head has full authority on all decisions regarding sales to internal or external customers. The Provence Division has always acquired a certain equipment component from the Normandy Division. However, when informed that the Normandy Division was increasing its unit price to E325, the Provence Division's management decided to purchase the component from outside suppliers at the price of E300.

The Normandy Division had recently ...

Solution Summary

This solution is comprised of a detailed explanation to answer will the company as a whole benefit if the Provence Division buys from the outside suppliers for E300 per unit, should the Provence Division purchase from outsiders at E300 per unit, should the Provence Division purchase from outsiders, and as the president, how would you respond to the Normandy Division manager's request.

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