Division B Has Variable Manufacturing Costs of $50 Per Unit

question 29

Multiple Choice

Division B has variable manufacturing costs of $50 per unit and fixed costs of $10 per unit. Assuming that Division B is operating significantly below capacity, what is the opportunity cost of an internal transfer when the market price is $75?

• A) $0.
• B) $25.
• C) $50.
• D) $60.

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Definitions:

Risk Seeking

A tendency to engage in behaviors or make decisions that entail known risks in the hope of achieving greater rewards.

Probability Of Loss

The likelihood or chance that an investment will result in a loss rather than a profit.

Positive Outcomes

The beneficial or desirable results achieved following specific actions or processes.

Risk Propensity

The inclination or tendency of an individual or organization to take or avoid risks.