(Appendix 12A)When a division is operating at full capacity, the transfer price to other divisions should not include opportunity costs.

Question

Quizplus · Accepted Answer

When a division is operating at full capacity, the transfer price should include opportunity costs. Otherwise, the division could prioritize internal transfers over external sales, leading to inefficiencies in the allocation of resources. Including opportunity costs encourages divisions to make economically rational decisions and ensures that resources are allocated efficiently within the company.

(Appendix 12A)When a Division Is Operating at Full Capacity, the Transfer