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 opportunity cost of transferring internally, assuming the division is operating at capacity?
A) $13.
B) $25.
C) $35.
D) $47.

Question

Quizplus · Accepted Answer

The opportunity cost of transferring internally is the difference between the external selling price and the variable costs that would be incurred if the division sold the unit externally. In this case, the external selling price is $60, and the variable costs are $35 + $12 = $47. Therefore, the opportunity cost of transferring internally is $60 - $47 = $13.

A Division Can Sell Externally for $60 Per Unit