Division Alpha can purchase a required part from an outside supplier for $35.
-Division Beta wants to supply the part at a transfer price of $38.50,which is above its incremental costs.Division Alpha's manager should
A)pay the $38.50 price to Division Beta.
B)tell his immediate supervisor that Division Beta is being unreasonable.
C)negotiate an appropriate transfer price with the manager of Division Beta.
D)buy from the outside supplier.

Question

Quizplus · Accepted Answer

Negotiating an appropriate transfer price with the manager of Division Beta is the best course of action because it allows both divisions to benefit from the transaction. Division Alpha can get the part at a lower price than the outside supplier, and Division Beta can make a profit on the sale.

Division Alpha Can Purchase a Required Part from an Outside