Final answer:
The lowest acceptable transfer price for a selling division with excess capacity is typically the variable cost of the product since any price above this will contribute to covering fixed costs and generating profit.
Step-by-step explanation:
When the selling division in an internal transfer has excess capacity for the product that is being transferred, the lowest acceptable transfer price from the perspective of the selling division would typically be the variable cost of producing the product. This is because, when operating under excess capacity, the division can produce additional units without incurring fixed costs, hence any price above variable cost would contribute to covering these fixed costs and generating some profit. However, the ideal transfer price may need to consider not just variable costs but also the opportunity costs, if any, to ensure the selling division is not worse off after the transfer.