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Problem 1: Which of the following methods should be selected if a company terminates all processing at the split-off point and desires to use a cost-allocation approach that considers the "revenue-producing ability" of each product?
Option 1: Relative-sales-value method.
Option 2: Reciprocal-accounting method.
Option 3: Physical-units method.
Option 4: Gross margin at split-off method.
Option 5: Net-realizable-value method.
Explain whether the transfer price selected for this transfer of sub-frames matters to the manager of the Chassis Division. and why
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