An appropriate transfer price between two divisions of The Stark Company can be determined from the following data: (CIA adapted) What is the natural bargaining range for the two divisions?
A)Between $20 and $50
B)Between $50 and $70
C)Any amount less than $50
D)$50 is the only acceptable transfer price

Question

Quizplus · Accepted Answer

The natural bargaining range is between the variable cost of the selling division ($20) and the market price ($50), as the selling division would not sell below its cost, and the buying division would not pay more than the market price.

An Appropriate Transfer Price Between Two Divisions of the Stark