Clariton Corporation Has Two Divisions, Kissimmee and Grant, and Evaluates

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.

Kissimmee is seeking an increase in its selling price to $28 per unit because of rising costs. Grant can obtain comparable units from an outside supplier for $26; 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:

A) Kissimmee should continue to do business with Grant and charge $28 per unit.
B) Kissimmee should continue to do business with Grant and charge $25 per unit.
C) Kissimmee should continue to do business with Grant because Kissimmee's variable cost per unit is only $18.
D) Grant should do business with the outside supplier.
E) Grant should split its business between Kissimmee and the outside supplier.