So Y is being transferred to the other division, That’s why the Minimum Price should be > 100 & the Greater contribution lost is $4 per hour so $40( 10×4) becomes our opportunity cost !! Thanks man !! Clear now !!
Because if Q buys from outside they will pay 350 and P will no longer be making it which will save costs of 240. So it will be costing the company an extra 110.
Hello sir,
Are there any workings for question 4?
Kind regards
A has unlimited production capacity and therefore the minimum TP is the marginal cost of $30.
B has net marginal revenue of 70 – 20 = 50, and therefore that is the maximum TP.
Have you watched the free lectures on this?
Sir In Question No 3,
We are giving up the Contribution of X ($4 per hour + 100 SP) because the business needs Y. So we only Produce Y & stop producing X??
In question 3, I didn’t quite understand why the marginal cost is 100 and not 80?
As you are looking to transfer product Y to another department, therefore you would use the marginal cost of product Y, not X.
So Y is being transferred to the other division, That’s why the Minimum Price should be > 100 & the Greater contribution lost is $4 per hour so $40( 10×4) becomes our opportunity cost !! Thanks man !! Clear now !!
In question 2, why is the buying cost of $350 must be subtracted with marginal cost of $240?
Because if Q buys from outside they will pay 350 and P will no longer be making it which will save costs of 240. So it will be costing the company an extra 110.