You Can Manufacture a Product in the US and Transfer

question 15

Multiple Choice

You can manufacture a product in the US and transfer it to Europe.If the marginal cost (MC) is $3 per unit,and the market price in Europe is $5 per unit,should the product be manufactured?

• A)No,because the net receipt of $5 is larger than the MC in the US.
• B)Yes,because the gross receipt of $3 is larger than the MC in the US.
• C)No,because the net receipt of $3 is the same as the MC in the US.
• D)Yes,because the net receipts in Europe will exceed the MC in the US.

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Definitions:

Applied Overhead

The portion of overhead costs allocated to specific jobs or departments based on a predetermined rate.

Department 2

A designated segment within an organization, often used in context to differentiate varying functional areas or operational units.

Department 1

is a label often used to identify a specific segment, unit, or division within an organization, focusing on a particular set of functions or tasks.

Applied Factory Overhead

This represents the allocation of manufacturing overhead costs to individual units of production based on a predetermined rate or base.