KNM Company is specialty manufacturer of a wide variety of
industrial chemicals and adhesives. Much of the raw material is
purchased in bulk from other chemical companies. One of the
chemicals, X2, is prepared in one of KNM’s own plants, the X2 unit.
X2 is shipped to other KNM plants at a given internal price.
The KNM plant in KSA requires 20,000 barrels of X2 per month
and can purchase from outside the firm for $300 per barrel. KNM’s
X2...