Turner Inc. is a factory that creates laptop bags that contain an added sleeve for increased protection. The sewing department is currently debating on the best way to proceed with sourcing the materials needed to create the end product. What is most likely to impact a potential price with an internal department?

Question

Quizplus · Accepted Answer

This question requires familiarity with how internal transfer pricing could be established and what impact that would have on the potential price that is determined. Choice C is the best example of something that would be most likely to impact an internal price. When a department has idle capacity, they will establish a minimum acceptable transfer price that is different than a department that does not have idle capacity. The other choices are either less likely or unlikely to impact the price for an internal sale.