If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the:
A) total cost of producing the product
B) market value less the usual markup on the product
C) market value of the product
D) total variable cost of producing the product

Question

Quizplus · Accepted Answer

When a company has excess capacity, it would only consider the variable costs of producing the product, as fixed costs are already covered. Therefore, the most it would pay is the total variable cost of producing the product.

If a Company Has Excess Capacity, the Most It Would