Which of the following is the formula for setting a minimum transfer price?
A)Sales less variable cost
B)Contribution less income taxes and interest
C)Variable cost to produce/sell + contribution margin forgone from the transfer
D)Variable cost to produce/sell + allocated fixed costs

Question

Quizplus · Accepted Answer

The formula for setting a minimum transfer price is the variable cost to produce/sell plus the contribution margin forgone from the transfer. This ensures that the selling division covers its costs and does not lose any contribution margin by making the transfer.

Which of the Following Is the Formula for Setting a Minimum