Which of the Following Statements About the General Transfer-Pricing Rule

question 48

Multiple Choice

Which of the following statements about the general transfer-pricing rule is/are true?
i. When the producing division has excess capacity, the transfer decision should be based on the outlay cost.
ii. When the producing division has no excess capacity, the opportunity cost is the foregone contribution from the lost sale.
iii. If the producing division has excess capacity or the external market is imperfectly competitive, the general rule and the external market price will not yield the same transfer price.

• A) i
• B) ii
• C) ii and iii
• D) All of the given answers

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