Business Unit A, the supplying business unit, is selling to an outside market. It has excess capacity and can use it to transfer product to the receiving business unit, Business Unit B. Business Unit A does not incur incremental fixed costs in the production of the units supplied to Business Unit B. The formula to calculate the transfer price in this scenario is:? a. (Total variable costs + incremental fixed cost) ÷ total units supplied b. (Total variable costs + Contribution margin lost) ÷ total units supplied c. (Total variable costs + incremental fixed costs + Contribution margin lost) ÷ total units supplied d. Total variable costs ÷ total units supplied
Business Unit A, the supplying business unit, is selling to an outside market. It has excess capacity and can use it to transfer product to the receiving business unit, Business Unit B. Business Unit A does not incur incremental fixed costs in the production of the units supplied to Business Unit B. The formula to calculate the transfer price in this scenario is:? a. (Total variable costs + incremental fixed cost) ÷ total units supplied b. (Total variable costs + Contribution margin lost) ÷ total units supplied c. (Total variable costs + incremental fixed costs + Contribution margin lost) ÷ total units supplied d. Total variable costs ÷ total units supplied
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
Problem 3MC
Related questions
Question
Business Unit A, the supplying business unit, is selling to an outside market. It has excess capacity and can use it to transfer product to the receiving business unit, Business Unit B. Business Unit A does not incur incremental fixed costs in the production of the units supplied to Business Unit B. The formula to calculate the transfer price in this scenario is:?
a. (Total variable costs + incremental fixed cost) ÷ total units supplied
b. (Total variable costs + Contribution margin lost) ÷ total units supplied
c. (Total variable costs + incremental fixed costs + Contribution margin lost) ÷ total units supplied
d. Total variable costs ÷ total units supplied
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning