A Division Can Sell Externally for $60 Per Unit

question 104

Multiple Choice

A division can sell externally for $60 per unit. Its variable manufacturing costs are $35 per unit, and its variable marketing costs are $12 per unit. What is the opportunity cost of transferring internally, assuming the division is operating at capacity?

• A) $13.
• B) $25.
• C) $35.
• D) $47.

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Definitions:

Operating Revenues

Operating Revenues are the income earned from a company's core business operations, excluding non-operating income sources like investments.

Income Tax Expense

The amount of money a company owes in taxes based on its taxable income.

Income from Operations

The earnings generated from a company's regular business activities before taxes and interest, indicating the efficiency of core operational management.