Laundry Equipment Division
The Laundry Equipment Division based its case on the foilowing arguments:
1. The division could have purchased a transmission, comparable in performance characteristics to the Gear and rransmission itirri.ior," unit, from the
Thorndike Machining Corporation for $tt.Zt.
2. The Gear and rransmission Division had agreed to this price in considera_
tion of being allowed to produce a1l the transmissions.
3. The intracompany pricing poricy was that the supplying divisions should sel
at competitive prices.
The general manager of the Laundry Equipment Division stated that it
would be unfair to penalize him for keeping the transmission business inside the
corporation as a benefit to the Gear and rransmission Division, particularly
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278 Part One The Management Control Enuironment
in the light of the promise made by the general managel of the Gear and Tran-L
mission Division.
The general manager also stated that he had not protested the price plu.
posal included in the June 1985 letter because he believed that it was thes
ioo early to open negotiations. His cost analysts had not evaluated the praposal, but he assumed that the Gear and Transmission Division was approlimately correct in its evaluation of the cost differences from the Thorndike
unit. His position was that the difference of 34 cents between the adjusted'
Thorndike price and the quoted Gear and Transmission price was not worti.
negotiating until nearer the production date. The Laundry Equipment Diision naturally had assumed that the Gear and Transmission Division wouna
Iive up to its agreement and, therefore, regarded the request for $12 as just a
negotiating gimmick.