Question

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

Answer 1

$25

Step-by-step explanation:

The computation of the opportunity cost of an internal transfer is shown below:

= Market price - variable manufacturing costs

= $75 - $50

= $25

Simply we deduct the variable manufacturing costs from the market price so that the accurate amount can come.

All other information which is given is not relevant. Hence, ignored it