Division A produces a component and wants to sell it to Division B.What does the transfer price represent for each division?
A)revenue to Division A and a cost to Division B
B)revenue to Division B and a cost to Division A
C)revenue to Division A and no effect on Division B
D)a cost to Division B and no effect on Division A

Question

Quizplus · Accepted Answer

The transfer price represents revenue for the selling division (Division A) because it is the amount they receive for the component, and it represents a cost for the buying division (Division B) because it is the amount they have to pay to acquire the component.

Division a Produces a Component and Wants to Sell It