### Cost Analysis for Division B**Scenario Overview:**Division B's Cost Structure:- **Variable Manufacturing Costs:** $59 per unit- **Fixed Costs:** $15 per unit**Context:**- Division B is operating significantly below capacity.- The market price for the product is $84.**Question:**What is the opportunity cost of an internal transfer when the market price is $84?**Analysis:**To determine the opportunity cost of the internal transfer, consider the potential revenue from selling externally at the market price ($84) versus the cost incurred by producing the unit internally (only variable costs, $59, since fixed costs do not change with production level when operating below capacity).

Note: If Division has excess capacity, then in case of internal transfer of additional units, it has…

Division B has variable manufacturing costs of $59 per unit and fixed costs of $15 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 $84?

Division B has variable manufacturing costs of $59 per unit and fixed costs of $15 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 $84?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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