In setting internal transfer prices, the minimum price that the selling division would accept is
A)a price that will result in a profit to the selling division.
B)a price that will result in a profit to the purchasing division.
C)its variable cost of the product plus opportunity costs lost by the transfer.
D)its variable cost plus an internal profit margin.

Question

Quizplus · Accepted Answer

The minimum price that the selling division would accept for an internal transfer is its variable cost of the product plus any opportunity costs lost by the transfer. This ensures the selling division covers its costs and compensates for any potential profit it foregoes by not selling the product externally.

In Setting Internal Transfer Prices, the Minimum Price That the Selling