What Would Be a Legitimate Reason for Upper Management to Insist

question 58

Multiple Choice

What would be a legitimate reason for upper management to insist on an internal transfer even though the product could be sourced outside the company at a price that is lower than the company's variable cost?

• A)Management is concerned that its manufacturing equipment will soon be obsolete, and it wants to get full use out of it before it happens.
• B)Management wants to ensure a secure supply of the product.
• C)The company has excess capacity.
• D)There is never a legitimate reason that justifies an internal transfer if a product can be sourced outside the company at a price that is lower than the company's variable cost.

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Definitions:

Accrued Interest

Interest that has accumulated on a loan or bond since the last payment date but has not yet been paid out.

Commission

A fee paid to an agent or employee for transacting a sale, which is typically a percentage of the sale price.

Accrued Interest

Interest that has accumulated over a certain period but has not yet been paid or received.

Interest Rate

The percentage of a sum of money charged for its use, determining the cost of borrowing or the return on savings.