Final answer:
The negotiated transfer price is the transfer price that would leave the selling division no worse off if the good is sold to an internal division option a is answer
Step-by-step explanation:
The negotiated transfer price is the transfer price that would leave the selling division no worse off if the good is sold to an internal division. It is a price agreed upon between the two divisions through negotiation. This transfer price ensures that both divisions are fairly compensated for their contributions.
For example, let's say Division A produces a product and Division B needs that product as a component for their final product. They agree on a negotiated transfer price of $10 per unit. If Division A sells the product to Division B at this price, both the divisions will be satisfied with the transaction.
The minimum transfer price is typically composed of the variable costs incurred to produce the good plus an opportunity cost, which represents the contribution to overhead and potential profit lost by not selling the good externally. Setting this price ensures a fair transaction within different divisions of a company, maintaining divisional autonomy and profitability. option a is answer