When a transfer price decreases
A)the profits of the division producing the intermediate product will rise
B)the profits of the division producing the intermediate product will fall
C)the costs of the division producing the intermediate product will rise
D)the costs of the division producing the intermediate product will fall

Question

​When a transfer price decreases
A)​the profits of the division producing the intermediate product will rise
B)the profits of the division producing the intermediate product will fall
C)the costs of the division producing the intermediate product will rise
D)​the costs of the division producing the intermediate product will fall

Quizplus · Accepted Answer

When the transfer price decreases, the division producing the intermediate product will receive less revenue for the product sold to the other division. This will lead to a decrease in the profits of the division producing the intermediate product.

​When a Transfer Price Decreases

When a Transfer Price Decreases