Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 25,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.At what price would the internal transfer occur?
A)At the lowest price that is acceptable to Division A
B)At the maximum price that is acceptable to Division B
C)It depends on the negotiation skills of the division managers
D)No transfer will occur

Question

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following: 
-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 25,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.At what price would the internal transfer occur?
A)At the lowest price that is acceptable to Division A 
B)At the maximum price that is acceptable to Division B 
C)It depends on the negotiation skills of the division managers 
D)No transfer will occur

Quizplus · Accepted Answer

The internal transfer price would depend on the negotiation skills of the division managers, as they need to agree on a price that is acceptable to both divisions.

Use the Following Information to Answer Questions