Dual-rate transfer pricing systems are appropriate when the:
A) Market price is unknown
B) Selling department has excess capacity
C) Market price is higher than the variable cost
D) Market price is higher than the full cost

Question

Quizplus · Accepted Answer

Dual-rate transfer pricing systems are appropriate when the selling department has excess capacity because the variable cost of producing one additional product is very low or close to zero. In this case, the company can benefit from transferring goods between departments at a lower rate, thus increasing overall profitability.

Dual-Rate Transfer Pricing Systems Are Appropriate When The