Where there is a perfectly competitive external market for a transfer product, the final product division should not pay the transfer product division a price in excess of that at which the transfer product can be obtained from outside suppliers.

Question

Quizplus · Accepted Answer

This is because in a perfectly competitive external market, there are many suppliers offering the transfer product at a competitive price. Therefore, the final product division should not pay more than the market price for the transfer product from the internal transfer product division.

Where There Is a Perfectly Competitive External Market for a Transfer