Division Alpha can purchase a required part from an outside supplier for $35.
-Division Beta is willing to supply the part at a transfer price of $36.50,which is its incremental costs.Division Alpha's manager should
A)pay the $38.50 price to Division Beta.
B)tell his immediate supervisor that Division Beta is being unreasonable.
C)negotiate an appropriate transfer price with the manager of Division Beta.
D)buy from the outside supplier.

Question

Quizplus · Accepted Answer

Division Alpha can purchase the part for only $35 from an outside supplier, which is cheaper than the $36.50 transfer price being offered by Division Beta. Therefore, it is best for Division Alpha to buy from the outside supplier than to accept Division Beta's offer.

Division Alpha Can Purchase a Required Part from an Outside