The "floor" in transfer pricing is
A)the transfer price that would leave the buying division no worse off if an input is purchased from an internal division.
B)the transfer price that would leave the selling division no worse off if the good is sold to an internal division.
C)the transfer price that would leave the buying division worse off if an input is purchased from an internal division.
D)none of these.

Question

Quizplus · Accepted Answer

The "floor" in transfer pricing refers to the minimum transfer price that would leave the selling division no worse off if the good is sold to an internal division, ensuring it covers its variable costs and contributes to its fixed costs and profits.

The "Floor" in Transfer Pricing Is