Assume the Transfer Price for a Pair of Soles Is

question 13

Multiple Choice

Assume the transfer price for a pair of soles is 180% of full costs of the Sole Division and 100,000 of soles are produced and transferred to the Assembly Division.The Sole Division's operating income is:

• A)$1,600,000.
• B)$1,800,000.
• C)$2,560,000.
• D)$3,600,000.

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Definitions:

Opportunity Cost

The forfeiture of potential benefits from other options by selecting a specific one.

Fixed Costs

Business expenses that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance.

Variable Costs

Costs that change in proportion to the level of goods or services a company produces.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future economic decisions.