If the selling division is operating at less than full capacity, the floor of the bargaining range would most probably be 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 a selling division is operating below full capacity, the floor of the bargaining range is typically set at the variable cost of manufacturing. This is because any price above the variable cost contributes to covering fixed costs and potentially generating profit, without incurring additional fixed costs.

If the Selling Division Is Operating at Less Than Full