An Internal Transfer Between Two Divisions Is in the Best

question 13

Multiple Choice

An internal transfer between two divisions is in the best economic interests of the entire organization when:

• A) the variable costs plus the opportunity cost of the selling division is greater than the external price for the buying division.
• B) the variable costs plus the opportunity cost of the selling division is less than the external price for the buying division.
• C) there is excess capacity in the buying division with no alternative use.
• D) there is no established market price for the buying division.

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Definitions:

Producing Bagels

The process of making bagels, involving mixing, shaping, boiling, and baking dough in a manner specific to this type of bread.

Marginal Cost

Marginal cost is the additional cost incurred from producing one more unit of a good or service.

Producing Bagels

The process of making bagels, which involves mixing, shaping, boiling and then baking dough, typically in a commercial or artisanal bakery setting.

Total Cost

The complete cost of producing a specific quantity of goods or services, including fixed and variable costs.