A Firm Has a Division That Produces Chemical Y,whose Average

question 17

Multiple Choice

A firm has a division that produces chemical Y,whose average total costs are ATC = 50 + 2Q (where Q is the quantity of Y) ,and a marketing division that adds its own average total costs of ATC = 20 + 3Q.There is no external market price of Y.The transfer price of Y should be:

• A) $50.
• B) $4Q.
• C) $50 + 4Q.
• D) $2Q.
• E) $5Q.

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Definitions:

Expense Accounts

Accounts used to record the consumption of economic benefits during the operational activities of a business.

Asset Accounts

Asset Accounts are financial ledger accounts that report the value of tangible and intangible items owned by an entity, such as cash, inventory, and equipment.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid, regardless of when the transaction occurred.

Financial Statements

Papers presenting a snapshot of a firm's financial health, which include the balance sheet, income statement, and cash flow statement.