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ra1l [238]
3 years ago
6

The Rubber Division of Morgan Company manufactures rubber moldings and sells them externally for $50. Its variable cost is $20 p

er unit, and its fixed cost per unit is $7. Morgan's president wants the Rubber Division to transfer 5,000 units to another company division at a price of $27.
Assuming the Rubber Division has available capacity of 5,000 units, the minimum transfer price it should accept is

a. $7.
b. $20.
c. $27.
d. $50.
Business
1 answer:
Musya8 [376]3 years ago
4 0

Answer:

b) $20

Explanation:

The minimum acceptable price per unit is $20.

This is because the minimum acceptable price is the break even price for the division. We will not include $7 fixed cost because it is not relevant to this transaction as it has to be paid regardless of this transfer.

The Minimum price thus is the price that cancels out all relevant costs namely the variable costs of $20.

Relevant costs are also known as the incremental costs that are incurred only when a particular activity is undertaken. Fixed costs as such are not incremental. Since there is spare capacity we are not forgoing any profits from external exchanges that needs to be accounted for.

Hope this helps

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Explanation:

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Answer:

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Explanation:

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What sets these two models apart is that in an open economy, both imports and exports are allowed, so that countries necessarily have to trade in more than one currency, so the exchange rate must be examined. In addition, business transactions are recorded in a balance of payments. So these are the two concepts that are not tried in a closed economy analysis, but are introduced in an open economy.

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You are looking to buy a car and you have been offered a loan with an APR of 5.7 %​, compounded monthly. a. What is the true mon
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Answer:

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Explanation:

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b.

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