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FromTheMoon [43]
4 years ago
5

Retro Rides, Incorporated, operates two divisions: (1) a Management Division that owns and manages classic automobile rentals in

Miami, Florida and (2) a Repair Division that restores classic automobiles in Clearwater, Florida. The Repair Division works on classic motorcycles, as well as other classic automobiles. The Repair Division has an estimated variable cost of $60.50 per labor-hour and has a backlog of work for automobile restoration. They charge $80.00 per hour for labor, which is standard for this type of work. The Management Division complained that it could hire its own repair workers for $62.00 per hour, including leasing an adequate work area. What is the minimum transfer price per hour that the Repair Division should obtain for its services, assuming it is operating at capacity?
A) $28.50.
B) $30.00.
C) $39.00.
D) $48.00.
Business
1 answer:
bagirrra123 [75]4 years ago
6 0

Answer:

D) $48

Explanation:

The minimum transfer price for the Repair division will be the variable cost which is standard for the same type of work. In the given scenario the price is $80 which is the maximum transfer price while $48 will be the minimum transfer price for Repair division.

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Externality basically causes the market to produce a large amount or little amount of goods and service, thereby causing an inefficient distribution or allocation of resources.

Therefore, when the manufacturing or consumption of a particular product by the consumers leads to an additional cost for a third party, it is known as negative externality.

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Internal is the answer

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