An internal transfer between two divisions is in the best economic interests of the entire organization when:
A) the variable costs plus the opportunity cost of the selling division is greater than the external price for the buying division.
B) the variable costs plus the opportunity cost of the selling division is less than the external price for the buying division.
C) there is excess capacity in the buying division with no alternative use.
D) there is no established market price for the buying division.

Question

Quizplus · Accepted Answer

An internal transfer is beneficial when the cost to the selling division (variable costs plus opportunity cost) is less than the external price, as it allows the organization to save money by not purchasing externally.

An Internal Transfer Between Two Divisions Is in the Best