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.

davidvdo says

Hello sir,

Are there any workings for question 4?

Kind regards

John Moffat says

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?

kvz911 says

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??

trenevskasara says

In question 3, I didn’t quite understand why the marginal cost is 100 and not 80?

cherry-pop says

As you are looking to transfer product Y to another department, therefore you would use the marginal cost of product Y, not X.

kvz911 says

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 !!

weirdxnii says

In question 2, why is the buying cost of $350 must be subtracted with marginal cost of $240?

John Moffat says

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.