A Division Can Sell Externally for $60 Per Unit

question 41

Multiple Choice

A division can sell externally for $60 per unit. Its variable manufacturing costs are $35 per unit, and its variable marketing costs are $12 per unit. What is the optimal transfer price for transferring internally, assuming the division is operating at capacity?

• A) $12.
• B) $35.
• C) $47.
• D) $60.

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Definitions:

Fundamental Attribution Error

The tendency for observers to overemphasize dispositional or personality-based explanations for behaviors observed in others while underemphasizing situational explanations.

Success

The achievement of a set goal, objective, or desired outcome.

Embezzlement

The act of dishonestly withholding assets for the purpose of conversion of such assets, by one or more individuals to whom the assets were entrusted.

Perceptually Exaggerating

The cognitive bias or tendency to overestimate the significance or size of an object, event, or outcome.