When the Selling Division in an Internal Transfer Has Unsatisfied

question 196

Multiple Choice

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,what is the lowest acceptable transfer price as far as the selling division is concerned?

• A) Variable cost of producing a unit of product.
• B) The full absorption cost of producing a unit of product.
• C) The market price charged to outside customers, less any costs saved by transferring internally.
• D) The amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.

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Definitions:

Specified Territory

A designated geographical area or market for which a person or entity holds responsibility, often in sales or distribution.

Authorization

The official permission or power to do something, often through a formal process or document.

Global Corporations

Large business entities that operate in multiple countries around the world, transcending national borders.

Direct Foreign Investment

An investment by an individual or company in one country in business interests located in another country, often by buying shares or establishing operations.