Chapter 1, Problem 2SBD

Business Unit A, the supplying business unit, is selling to an outside market. It has excess capacity and can use it to transfer product to the receiving business unit, Business Unit B. Business Unit A does not incur incremental fixed costs in the production of the units supplied to Business Unit B. The formula to calculate the transfer price in this scenario is?

The difference between the average customer’s willingness to pay and the total costs of a product is known as ______. When a company makes a profit, the difference between the price of the product and the cost of production is known as what?   Value creation and value capture are key concepts for which parts of business? If a company innovates in a way that reduces its production costs without affecting any features of the product, would that create value? Suppose a price war was to erupt in the airline market, which causes prices for flights to decline, but affected nothing else about the industry. Would this change the value created by airlines? Suppose a price war was to erupt in the airline market, which causes prices for flights to decline, but affected nothing else about the industry. Would this change the value captured by airlines?   Please solve all part and do not give solution in image format thanku

Why do companies allocate costs? What are some of the advantages and disadvantages to doing so?