What is the "floor" in transfer pricing?
A)the transfer price that would leave the buying division no worse off if an input is purchased from an internal division
B)the transfer price that would leave the selling division no worse off if a good is sold to an internal division
C)the transfer price that would leave the buying division worse off if an input is purchased from an internal division
D)the transfer price that would leave the selling division worse off if a good is purchased from an outside supplier

Question

Quizplus · Accepted Answer

The "floor" in transfer pricing refers to the minimum transfer price that would leave the selling division no worse off if a good is sold to an internal division, ensuring it covers its variable costs or out-of-pocket costs for producing the good.

What Is the "Floor" in Transfer Pricing