If the Selling Division Has Excess Capacity,the Transfer Price Should

question 134

Multiple Choice

If the selling division has excess capacity,the transfer price should be set at its:

• A) differential outlay costs.
• B) differential outlay costs plus the foregone contribution to the organization of making the transfer internally.
• C) selling price less the variable costs.
• D) selling price less the variable costs plus the foregone contribution to the organization of making the transfer internally.

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Definitions:

Saving

The act of setting aside a portion of current income for future use, typically in a bank account, investments, or other forms of saving vehicles.

Consumption

The process of using up goods and services to satisfy human wants or needs.

Residential Construction

The building and development of living spaces for individuals and families, including houses, apartments, and other dwellings designed for habitation.

Durables

Products or goods with a long life span, such as cars, appliances, and furniture, as opposed to consumables that are used up quickly.