An investment of money in idle inventory, in place of investing same amount of money somewhere else is an example of opportunity cost. Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another.
Book value of existing equipment is a historical cost and not necessary for deciding equipment replacement, thus it can be considered as
Book value of existing equipment is a historical cost and not necessary for deciding equipment replacement, thus it can be considered as sunk cost. A sunk cost is a cost that an entity has incurred, and which it can no longer recover.
Some of methods used for determining transfer prices are
A situation when groups and individuals work together for achieving a particular goal can be classified as goal congruence. Goal congruence is a situation in which people in multiple levels of an organization share the same goal. A well thought-out organizational design causes goal congruence and results in an organization being able to work together to accomplish a strategy.
An exertion for achieving a set goal is known as effort. The term effort refers to the specific and quantifiable count and/or measure of definable labor units that it is deemed are to be required in the attempts to arrive at completion of a phase (or of the entirety) of a particular schedule activity and/or work breakdown structure component, a distinct control account, or the project as a whole.
If opportunity cost per barrel is $45 per unit, incremental cost per barrel is $65, then minimum transfer price will be
Method of pricing, when two separate pricing methods are used to price transfer of products from one subunit to another, is called dual pricing. Dual pricing is a situation in which the same product or service is sold at different prices in different markets.