What is the general rule for setting a transfer price?
A) Additional costs of the supplying division + opportunity cost to the buying division
B) Additional costs of the supplying division + opportunity cost to the supplying division
C) Additional costs of the buying division + opportunity cost to the supplying division
D) Always set at full-cost-plus price

Question

Quizplus · Accepted Answer

The general rule for setting a transfer price is to include the additional costs of the supplying division plus the opportunity cost to the supplying division. This ensures that the supplying division covers its costs and is compensated for any lost opportunity to sell externally.

What Is the General Rule for Setting a Transfer Price