The maximum transfer price from the buying division's standpoint is the
A) total cost + opportunity cost.
B) variable cost + opportunity cost.
C) external purchase price.
D) external purchase price + opportunity cost.

Question

Quizplus · Accepted Answer

The maximum transfer price from the buying division's standpoint is the external purchase price. This is because the buying division would not be willing to pay more than the cost of purchasing the product from an external supplier. The opportunity cost may be taken into account in determining the minimum acceptable transfer price from the selling division's standpoint, but it is not relevant to the maximum transfer price from the buying division's standpoint.

The Maximum Transfer Price from the Buying Division's Standpoint Is