The range over which two divisions will negotiate a transfer price is:
A)anywhere above the supplying division's full cost of the product.
B)between the supplying division's variable cost and the market price of the product.
C)between the supplying division's variable cost and its full cost of the product.
D)between the supplying division's full cost and 180% above its full cost.

Question

Quizplus · Accepted Answer

The range over which two divisions will negotiate a transfer price is typically between the supplying division's variable cost and the market price of the product. This range ensures the supplying division covers its variable costs while not exceeding what the buying division would pay on the open market.

The Range Over Which Two Divisions Will Negotiate a Transfer