When a Division Is Operating at Capacity,the Transfer Price Should

question 109

Multiple Choice

When a division is operating at capacity,the transfer price should be ________.

• A) based on opportunity cost
• B) a market-based transfer price
• C) a cost-based transfer price
• D) the total manufacturing cost

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Definitions:

Marginal Propensity

The additional amount that people consume or save when they receive an extra dollar of income.

Simple Spending Multiplier

A ratio that estimates the impact on aggregate output (or income) of a change in autonomous spending.

Net Taxes

The total taxes paid by an individual or business minus any government subsidies or refunds received.

Federal Government Spending

Expenditure by the national government on goods, services, and public projects to influence a nation's economy.