When the Selling Division in an Internal Transfer Has Unsatisfied

question 67

Multiple Choice

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

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

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Definitions:

Bounded Rationality

A concept that decision-makers are limited by the information they have, cognitive limitations, and finite time to make decisions.

Bounded Rationality

The concept that when individuals make decisions, their rationality is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision.

Political Acceptability

The degree to which a policy, action, or decision is considered acceptable by political entities and the general public.

Organizational Members

Individuals who are part of a company or institution and contribute to its goals and culture.