Opportunity cost should be ignored in setting the transfer price.

Question

Quizplus · Accepted Answer

Opportunity cost should not be ignored in setting the transfer price. Transfer price should reflect the potential profit or loss the selling division foregoes by selling to the buying division instead of an external customer. Therefore, the opportunity cost of using internal resources to fulfill the internal transfer should be considered in setting the transfer price.

Opportunity Cost Should Be Ignored in Setting the Transfer Price