When a division is operating at full capacity,the transfer price to other divisions should include opportunity costs.

Question

Quizplus · Accepted Answer

When a division is operating at full capacity, the opportunity cost of using its resources for internal transfers should be considered in determining the transfer price. This is because the division could have sold those resources externally and earned a profit. Therefore, the transfer price should reflect this opportunity cost to ensure that the company's overall profitability is maximized.

When a Division Is Operating at Full Capacity,the Transfer Price