If a Supplying Division Has Excess Capacity, the Best Transfer

question 61

True/False

If a supplying division has excess capacity, the best transfer price is the product's variable cost.

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Definitions:

Transfer Price

The price at which goods or services are transferred between departments or affiliated entities within the same organization.

Divisional Managers

Managers who are responsible for overseeing and directing a division within a company, typically with responsibility for profit and loss.

Profit Centers

Segments within a company that are responsible for generating revenue and profit, often evaluated separately to analyze their performance.

Operations Margin

An indicator of profitability, calculated as the ratio of operating income to net sales, reflecting the efficiency of a company's operations.