If the selling division is operating at less than full capacity, the floor of the bargaining range would most probably set at
A) market price.
B) full manufacturing cost.
C) average price of all products sold by the selling division.
D) manufacturing cost plus some percentage for profit.
E) variable cost of manufacturing.

Question

Quizplus · Accepted Answer

When the selling division is operating at less than full capacity, the floor of the bargaining range is most likely set at the variable cost of manufacturing. This is because any price above the variable cost contributes to covering fixed costs and generating profit, making it a beneficial transaction for the selling division without incurring additional fixed costs.

If the Selling Division Is Operating at Less Than Full