It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Question

Quizplus · Accepted Answer

When a supplying division has unused capacity, negotiating a transfer price for internal transactions can result in higher profits for the company as a whole since the supplying division can cover its fixed costs and the receiving division can benefit from lower prices for inputs.

It Is Beneficial for Divisions in a Company to Negotiate