Question

In the scenario where the selling division in an internal transfer has unsatisfied demand from outside customers for the product being transferred, what is the lowest acceptable transfer price as far as the selling division is concerned?

a) Cost price
b) Market price
c) Negotiated price
d) Variable cost

Answer 1

The lowest acceptable transfer price for the selling division is the market price.

Step-by-step explanation:

The lowest acceptable transfer price for the selling division in the scenario where there is unsatisfied demand from outside customers is the market price.

The selling division wants to maximize its own profit, so it would prefer to sell the product at the market price, which is determined by the demand and supply in the market. By selling at the market price, the selling division can ensure that it is not losing potential revenue or customers to competitors.