The optimal transfer price from the corporation's viewpoint is:
A) The seller's variable cost plus the seller's opportunity cost
B) The amount that equals segment margin
C) The seller's variable cost plus the buyer's opportunity cost
D) The highest it can possibly obtain

Question

Quizplus · Accepted Answer

With a transfer price of variable cost plus opportunity cost, if there is excess capacity, outside purchases will not be made unless they can be made at variable cost; and if there is no excess capacity it does not matter to the company whether purchases are outside or transferred internally.

The Optimal Transfer Price from the Corporation's Viewpoint Is